Gold price drops to lowest level in 4-mths ahead of Yellen speech

Otmane El Rhazi from The Bullion Desk.

The gold price dropped to its lowest level in four months on Wednesday afternoon, as a raft of positive US data pushed the dollar higher ahead of Federal Resever chairwoman Janet Yellen’s semi-annual testimony.

Spot gold was last at $1,147.20/1,148.00 per ounce, down $8 on the previous session, having struck its lowest since March 18 at $1,146.10.

The losses come following a raft of positive US data – 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.

The dollar was last up 0.5 percent at 1.0958 against the euro, close to session highs.

Gold is now hovering just a few dollars from what would be its lowest level this year, at $1,142.90, a November 2014 low, just before Fed Chair Janet Yellen’s semi-annual testimony to Congress begins.

Yellen’s testimony will be scrutinised for clues on when the US central bank will begin to raise interest rates, which have been near zero since 2008.

Last week, she indicated that the Fed is still aiming to normalise policy this year; market observers will hope to find out whether that will be in September or December.

They will also be looking for suggestions on whether the first increase will be followed by successive changes and how quickly these will be made.

Any indications of a near-term increase could give the dollar a push higher and pressure gold lower – the metal’s main drivers for some time have been currencies. Higher US interest rates are likely to push many speculators away from the market in favour of yield-bearing assets such as bonds.

In other metals, silver was last down nearly two percent at $15.02/15.07, down 29 cents, while platinum was down $6 at $1,015/1,020 and palladium was down $4 at $644/649.

(Editing by Tom Jennemann)

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