By Myra P. Saefong and Rachel Koning Beals
Gold futures settled modestly higher on Friday, paring earlier gains, as traders eyed moves in the dollar following comments from two top Federal Reserve officials that hinted at a potential U.S. interest-rate hike as early as next month.
The dollar saw volatile trading after Federal Reserve Chairwoman Janet Yellen’s speech at the Kansas City Fed’s annual economic symposium at Jackson Hole, Wyo. She said the case for an increase in the federal-funds rate had strengthened in recent months, but would remain dependent on what incoming data say about the U.S. economy.
Following the comments, gold prices rallied $20 an ounce or more when the greenback began to drop versus other major currencies.
But the dollar then turned decidedly higher after Fed Vice Chairman Stanley Fischer, in an interview with CNBC, said Yellen’s speech was “consistent” with the possibility of two rate increases this year. Fischer, however, also said that the August jobs report will influence the central bank’s rate decision, echoing Yellen’s emphasis on the importance of incoming economic data.
The prospect for higher rates would usually lift the dollar, depressing the value of precious metals priced in the currency. And a rate increase tends to cut demand for assets that don’t provide a yield, like gold.
December gold GCZ6, +0.08% tacked on $1.30, or 0.1%, to settle at $1,325.90 an ounce Friday. It had eased back from earlier highs above $1,344 that were hit as Yellen spoke and the U.S. ICE Dollar Index DXY, +0.85% dropped. Gold futures were down about 1.5% for the week, the biggest weekly decline since the week ended July 15, FactSet data show.
Meanwhile, December silver SIZ6, +0.48% rose 13 cents, or 0.7%, to $18.745 an ounce, leaving the white metal with a 3.6% weekly drop.
“Yellen’s speech is notable both for what it says and does not say,” said John Butler, head of wealth services at Goldmoney Inc. “While she strikes a superficially ‘hawkish’ tone short term, indicating that she holds a bias to raise rather than reduce rates over the coming months, far more important is the ‘new mandate’ that she claims the Fed needs to implement what you might call ‘permanent unconventional policy.’”