Gold fell below US$1,200 for the first time since mid-February on Monday, as comments from Federal Reserve chief Janet Yellen on the likelihood of higher United States interest rates sent the dollar to two-month highs.
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Fed Chair Janet Yellen said on Friday a rate hike in the coming months would likely be appropriate, pointing to an improvement in the economy and a strong labor market.
The probability of a rate increase at the Federal Open Market Committee’s June 14-15 meeting rose to around 34 per cent from 26 per cent on Thursday, according to CME’s Fedwatch program.
During a ceremonial event at Harvard University Friday, at which she received the 2016 Radcliffe Medal, the Fed’s top official noted that additional improvements to the USA economy will likely warrant another rate boost, which last happened in December for the first time in years. And Friday, Federal Reserve Chair Janet Yellen said the Fed was monitoring economic data, but she expressed confidence about the US recovery.
That has also helped many economists raise their GDP estimates for the second quarter, with some estimating a growth rate nearing 3% after the anemic 0.5% growth that America saw in the first quarter of the year.
Yellen said the Fed wants to be measured about raising rates because if the move triggers a downturn, the central bank would have limited options to jumpstart the economy.
“You don’t want to wait too long, but neither do you want to be in a hurry”, said the Fed’s Powell, who denied there’s a coordinated effort by central bank officials to signal a rate increase. Hourly wages are expected to show a 0.2% increase from the previous month.
The stronger USA dollar has kept commodity prices under pressure.
While a softer dollar on Tuesday gave gold a boost, the recent recovery in risk sentiment pushed the precious metal to its biggest monthly decline since November.
Japan’s Nikkei stock index added 0.5%, as the yen weakened and expectations rose that the government would delay a sales tax hike scheduled for April next year.
The dollar index was trading around two-month highs, adding 0.3% to 95.826.
Other data showed the French economy grew a stronger-then-expected 0.6 percent in the first quarter.
US gold was up 0.2 percent at $1219.8.
The Dow Jones Industrial Average edged higher by 44.93 points or 0.25 percent to 17,873.22, S&P 500 gained 8.96 points or 0.43 percent to 2,099.06 and Nasdaq was up by 31.74 points or 0.65 percent to 4,933.50.
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Brent crude futures were lower at $49.36 a barrel, on rising output from the Middle East, but poised for a gain of almost 3 percent for the month.
