NEW YORK/LONDON Gold rose more than 1 percent to a three-week high on Wednesday, bolstered by a weaker dollar on declining expectations that the U.S. Federal Reserve will raise interest rates any time soon.
Advertisement
Even so, in her first comments since Friday’s monthly jobs market data shocked markets and sent the dollar tumbling, Yellen backed off from making specific forecasts for interest rate increases, only saying they should come “gradually”.
Among the factors that might persuade the Fed against raising interest rates next week are slowing job creation and U.S. economic growth as well as uncertainty about the UK’s potential exit from the European Union (Brexit) and a slowdown in China’s economy.
Yellen delivered a “largely favourable” message on the United States economy, despite Friday’s disappointing job numbers, but listed the global economic outlook as a key area of uncertainty.
Dismal economic data from the US has also tempered market expectations that the Federal Reserve will raise interest rates in June, further boosting gold prices and weighing on the dollar.
The Fed’s policy-setting committee meets next week, on 14-15 June.
“She was upbeat, but compared to her speech on May 27, when she said a move would be appropriate ‘in coming months, ‘ she wasn’t specific about timing”, said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong.
The dollar has been under pressure since the USA nonfarm payrolls report on Friday showed the slowest job growth in more than five years in May, quashing expectations for a near-term US interest rate hike.
In Asia, the world’s biggest gold consumer, China kept its reserves unchanged in May, the central bank said on Tuesday, but analysts expect it will keep purchasing bullion to diversify its forex reserves.
KEEPING SCORE: Europe got off to a strong start with Britain’s FTSE 100 up 0.6 percent to 6,312.16.
Global stock markets posted gains Tuesday as oil prices rose and after US Federal Reserve chief Janet Yellen expressed confidence in the US economy despite poor jobs data.
The dollar was at 107.70 yen Tuesday, compared with 107.57 yen in NY and well up from the low of 106.38 yen hit after the initial data release.
The US central bank raised rates from near zero in December in the first US policy tightening in almost a decade. Palladium also touched a three-week high at $586.61, while platinum marked its highest in two weeks at $1,019.58 an ounce.
Advertisement
USA equities reacted positively to her speech, with the Dow Jones industrial average (Dow Jones Global Indexes:.DJI) rising more than 100 points. The contract rose $1.07, or 2.2 percent, to $49.69 a barrel on Monday, its highest closing price this year.
