Gold finishes lower, Yellen spells out timing of rate rise

Otmane El Rhazi from The Bullion Desk.

Gold prices sunk to an eight-month low on Wednesday as Federal Reserve chairwoman Janet Yellen reaffirmed her hawkish outlook for an initial interest rate rise.

Gold for August delivery on Comex division of the New York Mercantile Exchange declined $6.10 to settle at $1,147.40 per ounce. Earlier the price touched $1,141.90, the lowest since November 2014.

During a semi-annual congressional hearing today in Washington DC, Yellen maintained her stance that if economic conditions continue to improve as expected, an interest rate rise would occur sometime in 2015.

Yellen was optimistic on the direction of the US economy after first quarter GDP was negative stemming from a harsh winter that slowed consumption and disrupted manufacturing.

“Some of the headwinds restraining economic growth, including the effects of dollar appreciation on net exports and the effect of lower oil prices on capital spending, should diminish over time,” Yellen said.

“As a result, the Federal Open Market Committee (FOMC) expects US GDP growth to strengthen over the remainder of this year and the unemployment rate to decline gradually,” she added. 

Also weighing on the precious metal’s complex is recent better-than-exected data from the US – PPI came in at 0.4 percent against consensus of 0.2 percent, while the core figure – which strips out the volatile elements – came in at 0.3 percent against expectations of 0.1 percent.

The Empire State manufacturing index also ticked higher at 3.9 against a 3.4 percent forecast, while the capacity utilisation rate and industrial production also bettered expectations at 78.4 percent and 0.3 percent respectively.

In China, GDP growth in the second quarter at seven percent was unchanged from the first quarter but better than the expected reading of 6.9 percent.

Industrial production climbed to 6.8 percent from 6.1 percent and fixed asset investment was unchanged at 11.4 percent, which was better than the expected 11.2 percent. Retail sales climbed 10.6 percent from 10.1 percent previously.

While in US equities, the Dow Jones industrial average and S&P were both up 0.1 percent, with the dollar 0.6 percent stronger at $1.0946 against the euro.

As for other precious metals, Comex silver for September delivery was last down 24 cents to $15.075 per ounce. Trade has ranged from $14.960 to $15.360.

Platinum for October delivery fell $6.40 to $1,022.0 per ounce, while the most actively traded palladium contract was at $643.70 per ounce, down $13.40.

(Editing by Tom Jennemann)

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