By Rachel Koning Beals
Prices marginally higher Friday ahead of 10 a.m. Eastern Fed speech
Gold futures crawled up from one-month lows Friday but remained on track for a weekly drop as financial markets braced for potential clues on Federal Reserve interest-rate timing when Chairwoman Janet Yellen speaks at the central bank’s Rocky Mountain retreat this morning.
In a speech scheduled for 10 a.m. Eastern, Yellen may signal the Fed is ready to raise interest rates next month, or perhaps at the group’s final meeting of the year in December, after the result of the U.S. presidential election.
“Even though the Fed chief could spend most of her time discussing the implications of a low natural rate of interest and the longer-term future of monetary policy, any comments she makes with regards to the near-term rate path are likely to determine the dollar’s short-term direction,” said Charalambos Pissouros, senior analyst with IronFX Global.
The prospect for higher rates could lift the dollar, depressing the value of precious metals priced in the currency. Plus, a rate increase tends to cut demand for assets that don’t provide a yield, like gold.
“Fed signals regarding the likelihood of a hike this year have been ambiguous lately,” Pissouros added. “The July [Federal Open Market Committee] minutes had a dovish tilt, showing that most members were skeptical to commit to anything until more data validate a rate move. However, key FOMC officials have made relatively hawkish remarks after the release of the minutes, indicating that September remains a live meeting and that markets are underestimating the possibility of a near-term hike.”