Precious metals prices steady, market awaits Yellen testimony

Otmane El Rhazi from The Bullion Desk.

Gold was effectively unchanged again on Wednesday morning ahead of Federal Reserve chair Janet Yellen’s semi-annual testimony to Congress this afternoon.

The spot gold price was last at $1,154.20/1,155.00 per ounce, down $1.20 on Tuesday’s close and trading within an intraday range of just $4. In other metals, silver was down one cent at $15.30/15.35, platinum was up $4 at $1,025/1,030 and palladium was $5 lower at $653/658.

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.

“Yellen’s speech this afternoon is likely to set the tone for the dollar and therefore gold,” FastMarkets’ William Adams said.

Meanwhile, the Greek parliament is set to vote today on the proposals agreed with eurozone creditors earlier in the week. Prime Minister Alexis Tsipras must rely on opposition support to get the necessary reforms through – members of his governing party are increasingly withdrawing support for the agreement.

Tsipras must implement four new laws today to qualify for the country’s third bailout deal. But even if the new laws are implemented, the agreement must still be ratified by the other eurozone countries.

Despite some optimism that a deal would be reached after opposition leaders appeared to suggest they would vote for the proposals, other markets remain uncertain. All major European indices are almost unchanged for the session, as is the euro at 1.1025 against the dollar.

In data, China’s 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.

But the CSI closed three percent lower on Wednesday – the solid data makes the possibility of further stimulus measures from Beijing less likely. The Nikkei closed up 0.38 percent, while the Hang Seng closed down 0.26 percent.

The US PPI, the Empire State manufacturing index, the capacity utilisation rate, industrial production and crude oil inventories are due later.

(Editing by Mark Shaw)

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