Prices were volatile, with the metal tracking moves in the US dollar as traders assessed comments from Federal Reserve Chairman Janet Yellen and Vice Chair Stanley Fischer, which hinted at the potential for an interest-rate increase as early as next month.
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“I believe the case for an increase in the federal funds rate has strengthened in recent months” Yellen said addressing an worldwide gathering of central bankers here.
Speaking at a three-day worldwide gathering of central bankers in Jackson Hole, Wyoming, Ms Yellen said: “The US economy was nearing the Federal Reserve’s statutory goals of maximum employment and price stability”.
Benchmark 10-year notes US10YT=RR were down 16/32 in price to yield 1.63 percent, the highest since June 24, and up from 1.56 percent before Yellen’s comments.
Indian shares may open lower on Monday after Fed Chair Janet Yellen acknowledged a strengthening economy and said that rates could move higher over coming months.
The Dow slid 0.3 percent and the S&P 500 dropped 0.2 percent while the tech-heavy Nasdaq inched up 0.1 percent. She pointed to steady gains in employment and strength in consumer spending.
After the Yellen remarks, markets reacted differently, with stocks globally rising, and the USA dollar dropping amid no clear guidance on when the next move on interest rates may come.
Belisle said if the markets interpreted Yellen’s comments as more hawkish, that benefited the US dollar. Though she did not cite when a rate hike might come, she believes “the case for an increase in the federal funds rate has strengthened in recent months”.
The Fed may also want to explore other options, including broadening the range of assets it can purchase, raising the inflation target, or targeting nominal GDP, she said.
With no strong inflationary tendencies, the Fed can continue at a gradual pace and guide market expectations accordingly, said economists at the Institute of International Finance (IIF) Friday in a report, expecting one rate hike in December and two more in 2017.
She added that the FOMC expected the inflation to rise to 2% over the next few years.
Earlier, Atlanta Fed President Dennis Lockhart said on Bloomberg Television that the Fed could hike rates possibly twice this year.
The odds of a USA rate hike as soon as September climbed to 30 percent from 21 percent on Thursday, according to CME Group’s FedWatch tool.
Foreign funds have bought a net $5.8 billion of local shares this year, the most in Asia after Taiwan and South Korea, as capital flows to emerging markets accelerated amid a wave of global policy easing.
Even if the Fed does decide to push interest rates up, however, it will most likely only be by around a quarter of a percent.
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Dr Yellen told a monetary policy conference that the case for a rate increase has strengthened in recent months.
