Forex Marketz Daily Forex News – Fully Markets Update
The price of spot gold (XAU/USD) inched higher as Federal Reserve Chair Dr. Janet Yellen spoke before the United States Congress. She stated that that the central bank will gradually tighten monetary policy. This means rates will likely rise only one more time this year.
As of 4:00 am GMT, spot gold futures rose 0.3 percent to $1,223.11 per ounce. US gold futures, for August delivery, were up 0.3 percent to $1,222.60 per ounce.
According to Yellen, the world’s largest economy is healthy enough for the Fed to raise rates. The Fed will also begin winding down its massive bond portfolio. However, low inflation and a low neutral rate may leave the central bank with little options as it proceeds.
Then dollar weakened as traders perceived Yellen to be a bit dovish with her comments. A weaker dollar and falling interest rates will support the yellow metal.
Gold Traders prefer Lower Yields
Lower yields reduce the opportunity cost of holding non yielding gold. The weaker dollar makes the yellow bullion cheaper for non US investors. Higher interest rates pushes yields up and is seen as a boost for the dollar.
The yellow metal and its short term future will be decided on Friday by the US CPI release. This is a major driver for the Dollar, equities and bonds.
On a technical note, XAU/USD may revisit its July 10 low. This key level is at $1,204.45 per ounce. This would conclude the retracement higher indicating another bounce higher could be in the cards.
