Gold Prices Fall After Yellen Reiterates Plan to Raise Rates
Washington (July 15) Gold prices pulled lower on Wednesday after Federal Reserve Chairwoman Janet Yellen's prepared remarks to Congress reiterated the U.S. central bank's plans to raise interest rates later this year.
The Fed hasn't wavered from its path toward tighter monetary policy as the domestic economy continues to improve despite threats from turmoil overseas, Ms. Yellen said. The testimony, which will be presented at 10 a.m. EDT Wednesday to the House Financial Services Committee, kicks off two days of hearings before lawmakers.
Gold prices were trading near unchanged ahead of Ms. Yellen's remarks but fell 0.4% to $1,148.70 a troy ounce as investors reacted to the news. The most actively traded gold futures contract, for August delivery, was recently down $ 2.80, or 0.2%, at $1,150.70 a troy ounce on the Comex division of the New York Mercantile Exchange.
"The interest rate hike is coming," said John Payne, senior market analyst with Daniels Trading in Chicago.
"Gold is a gauge for the behavior of the U.S. Federal Reserve going forward," he said, adding that prices are trading near the year's lows, which is a reflection of investors bracing for a monetary policy move from the central bank.
Gold prices have marched lower for months in anticipation of higher U.S. interest rates. The Fed is widely expected to raise borrowing costs later this year, ending a historic period of near-zero benchmark interest rates. Some investors have been selling their bullion holdings in advance of this on concern that the precious metal, which doesn't pay interest or dividends, will struggle to compete with bonds and stocks once rates rise.
Gold traders are hoping to glean additional insights into the Fed's assessment of U.S. economic health and the likely path of monetary policy from Ms. Yellen's question-and-answer session on Capitol Hill. The Fed chief is also expected to share her views on the recent crisis in China and the showdown between Greece and its European creditors, and the likely impact those events hold for the U.S. economy.
Source: NASDAQ.com
