Gold hits 4-month low as Fed signals rate rise this year

15-Jul (Reuters) – Gold prices fell to four-month lows on Wednesday, extending losses for a third session as Federal Reserve Chair Janet Yellen said the U.S. central bank remains on track to raise interest rates this year.

In testimony prepared for the U.S. House of Representatives’ Financial Services Committee, Yellen said the labour market is expected to improve steadily, and that turmoil abroad is unlikely to throw the U.S. economy off track.

That knocked gold to a low of $1,145.75 an ounce, its weakest since mid-March.

Spot gold was down 0.6 percent at $1,147.43 an ounce at 1402 GMT, while U.S. gold futures for August delivery were down $7.30 an ounce at $1,146.30.

U.S. stocks opened marginally lower after Yellen’s remarks, while the dollar rose half a percent against a basket of currencies, pressuring gold, which is priced in the dollar.

“Yellen confirming that the Fed will raise interest rates later this year is nothing new, but nevertheless this helped the dollar to appreciate, which is weighing on the gold price,” Commerzbank analyst Daniel Briesemann said.

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PG View: Let’s be clear, there was no “confirmation” that there will be a rate hike later this year. Here’s what she really said (emphasis is mine):

If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target…

But let me emphasize again that these are projections based on the anticipated path of the economy, not statements of intent to raise rates at any particular time.