Gold under pressure as US dollar surges after Yellen’s comments

The spot gold price edged lower during Asian trading hours on Friday November 18 as the US dollar surged after Federal Reserve chairwoman Janet Yellen said a US rate hike could come “relatively soon”.

The spot gold price was recently quoted at $1,208.00/1,208.35 per oz, down $6.57 on the previous close. Trade has ranged from $1,205.40 to $1,216.20 so far.

Yellen’s testimony at the US congressional Joint Economic Committee in Washington DC on Thursday has increased market’s confidence that the Fed will raise rates in December, ANZ Research said on Friday morning.

“Such an increase could well become appropriate relatively soon,” Yellen had said.

Yellen had painted a reasonably upbeat assessment of the economy, but one that still requires only gradual rate increases. On her post-election assessment, Yellen acknowledged that markets have moved to factor in higher growth and inflation and therefore higher fed funds rates, but the Fed needs to wait and see what happens, ANZ noted.

Market participants currently see a 90.6% chance of a US rate hike in December, according to the CME FedWatch Tool.

The US dollar index reached 101.33 on Friday, the highest since April 2003. The index was recently at up 0.23% at 101.22 on Friday.

In US data released Thursday, the CPI came in as expected at 0.4% while the core CPI undershot at 0.1%. Building permits and housing starts were better than expected at 1.23 million and 1.32 million respectively. Unemployment claims also were better than forecast at 235,000 but the Philly Fed manufacturing index missed at 7.6.

It is a light day for data with mainly EU current account and US CB leading index due later today.

In other commodities, the Brent crude oil spot price rose 0.03% to $46.01, and the Texas light sweet crude oil spot price fell 0.36% to $44.87 recently on Friday.

In equities, the Shanghai Composite slipped 0.09% to 3.205.51 so far on Friday.

In the other precious metals, the spot silver price fell $0.07 to $16.58/16.60 per oz. Platinum at $923/928 per oz was down $1 while palladium decreased $9 to $712/718 per oz.

On the Shanghai Futures Exchange, gold for June delivery was recently at 273.70 yuan ($40) per gram, and the June silver was at 4,146 yuan per kilogram.

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