Gold prices fall after Yellen speech
London (Sept 25) Gold was trading lower on the London spot market on Friday, after Federal Reserve Chairwoman Janet Yellen said a rise in US interest rates is likely to happen later this year, which supported the dollar.
Spot gold was down 0.8 per cent at $US1,144.20 a troy ounce in morning European trade, after hitting a four-week high in the previous session at $US1,156.72 an ounce.
Ms Yellen told an audience at the University of Massachusetts that a rate increase could happen before the end of the year. The FOMC has two more scheduled meetings left in 2015 to make its move, one in October and one in December.
As a result, "the dollar strengthened and some selling was noted in gold, " David Govett, head of precious metals trading at Marex Spectron, said in a note.
A rate increase would strengthen the dollar further and make the precious metal more expensive to buy for other currency-holders.
Looking ahead, seasonal demand from China is seen to boost the price of the precious metal. China accounts for roughly a quarter of global gold demand.
"Because China is now facing a period which traditionally sees the highest demand for gold -- it begins with 'Golden Week' in early October and continues until the New Year Festival in early February -- gold imports should also continue to rise in the next few months," said Commerzbank.
The emissions scandal raging around Volkswagen AG, meanwhile, continued to support palladium prices. The metal was trading up 1.5 per cent at $US663.04 an ounce.
The German car maker apologized for inserting software into 11 million of its diesel-engine cars to cheat strict US auto-pollution regulations and its chief executive, Martin Winterkorn, stepped down.
On Thursday, however, Volkswagen told the German government that some of its European-sold diesel-powered cars are affected by the same software.
"We have been informed that there are also 1.6- and 2-liter diesel cars that are affected in Europe," Germany's Transport Minister Alexander Dobrindt said in Berlin. "We will continue to work intensively with Volkswagen to find out which vehicles are affected," he said.
The revelations have seen platinum prices take a hit, as the precious metal is used heavily in diesel autocatalysts. Palladium, though, has attracted investors because it is used predominantly in gasoline engine cars, which are seen to profit by eating into the majority stake diesel engine's have in the European car market.
Gold could also benefit as investors seek a safe place to stash their cash.
"The crisis of confidence has spread into the core of European industries...triggering safe-haven flows," said Christian Gattiker, chief strategist and head of research at Julius Baer.
Spot platinum was exchanging hands at $US946.52 an ounce, down 0.5 per cent, and spot silver was 0.4 per cent lower at $US15.065 an ounce.