Gold Little Changed After Yellen Maintains Interest Rate Outlook

Updated on

Gold pared gains, trading little changed, after Federal Reserve Chair Janet Yellen said she expects to raise interest rates this year and repeated that the subsequent pace of increases will be gradual.

The Bloomberg Dollar Spot Index trimmed losses against a basket of 10 currencies, reducing the appeal of gold as an alternative asset. Prices have dropped 2.1 percent this year as the prospect of higher rates curbed the appeal of bullion, which doesn’t pay interest or give returns like other assets such as bonds and equities.

This week, the metal rallied from the lowest since March 18 after minutes of the Fed’s last meeting showed officials expressed concern on weakness in consumer spending and risks in Asia and Europe that have since intensified. Yellen, speaking Friday in her first public remarks since the June meeting of the Federal Open Market Committee, also said “unanticipated developments” could delay or accelerate the increase.

“People are still trying to understand if her tone was hawkish in this statement,” George Gero, a vice president of global futures at RBC Capital Markets in New York, said in a telephone interview. “While we could get a raise this year it will probably be very small.”

Gold for immediate delivery fell less than 0.1 percent to $1,159.17 an ounce at 1:51 p.m. in New York, according to Bloomberg generic pricing. The metal is heading for a third straight weekly loss. Gold futures for August delivery fell 0.1 percent to settle at $1,157.90.

A plunge in Chinese equities and a potential Greek exit from the euro zone spurred concerns on global economic growth. Fed officials considering the timing of the first rate increase since 2006 are weighing a domestic economy that has shown improvement since their last meeting against the deepening woes in China and the European Union.

“Over the past month, we’ve seen the probability of a U.S. interest-rate hike decrease, and that’s definitely fed through to gold and wider financial markets,” Dan Smith, a senior adviser at Oxford Economics, said by phone from London on Friday. “Interest-rate expectations are going to be pretty crucial for the next few years.”

Silver, platinum and palladium rose.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE