Gold Gains On Yellen Speech

July 12th, 2017 by

Fed Chair Janet Yellen testifying before Congress (photo: Federal Reserve)

Fed Chair Janet Yellen testifying before Congress (photo: Federal Reserve)

Gold prices saw an immediate, moderate jump in early trading this morning, as the prepared remarks of Federal Reserve head Janet Yellen were released to the press. Her statements that the Fed would stop raising rates before they reached pre-crisis levels was taken as an unexpectedly dovish stance by traders.

Spot gold popped more than $9 higher on the news, with other precious metals following suit. Platinum and palladium soared in morning trading, each gaining more than 1.6%. Silver prices were up 0.7% at 9:30am Eastern Time, setting up a run to break back above the $16 mark.

In currency markets, the dollar blipped up and down within the span of a couple of minutes before resuming steady trading just above unchanged. The British pound is recovering some of yesterday’s losses as wages and unemployment numbers came in far above expectations. The euro remains in defensive mode ahead of Congressional questioning of Janet Yellen on her monetary policy plans.

The promise that interest rates will not climb as high as they were prior to 2008 is helping Treasuries. Now that markets have a rough idea of where the rate hikes will stop, inflation pressures on present-day bond yields have eased.

oil glutCrashing crude prices are another dis-inflationary component to the overall economy.  Not only will energy costs fall, easing expenses at the wholesale level, but the massive plastics and fertilizer sectors will also see their input expenses drop.

Wall St opened higher, following the lead of most Asian and European markets. Generally hawkish clues from the central banks of the Western democracies are being treated as signals that their respective economies are recovering from the Great Recession.

 

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