Gold futures snapped a two-day gain to end lower on Friday after having surged over 2 percent yesterday, amid renewed expectations that the Federal Reserve will raise interest rates in the next few months.
A rate hike is appropriate in either October or December, Fed Chair Janet Yellen said last night in a speech delivered at the University of Massachusetts.
“If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting its goals,” Yellen said in a prepared speech.
The speech was focused on inflation, which Yellen expects will return to 2 percent annual growth rate “over the next few years.”
She focused on some of the global headwinds that the Fed cited in last week’s statement as reasons for not raising interest rates in September. Despite problems in China and Europe, Yellen does not think these issues will prove large enough “to have a significant path of the path of policy.”
In economic news, U.S. economic growth was revised higher for the April-to-June period, raising expectations that the Federal Reserve will soon raise interest rates. However, third quarter growth is expected to be slower, somewhere near 2 percent.
Gold for December delivery, the most actively traded contract, dropped $8.20 or 0.7 percent, to settle at $1,145.60 an ounce, on the Comex division of the New York Mercantile Exchange Friday.
Gold for December delivery scaled an intraday high of $1, 151.10 and a low of $1,140.10 an ounce.
On Wednesday, gold prices for December delivery surged $22.30 or 2.0 percent, to settle at $1,153.80 an ounce, as investors opted for the safe haven appeal of the precious metal after global equity markets continued to decline on some disappointing economic data from the U.S.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose to 680.27 tons on Friday from its previous close of 676.40 tons on Thursday.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 96.36 on Friday, up from its previous close of 96.30 in late North American trade on Thursday. The dollar scaled a high of 96.70 intraday and a low of 96.18.
The euro trended lower against the dollar at 1.1174 on Friday, as compared to its previous close of 1.1233 in North American trade late Thursday. The euro scaled a high of 1.1234 intraday and a low of 1.1118.
On the economic front, updated government data showed that the U.S. Gross Domestic Product expanded at a revised rate of 3.9 percent in the second quarter. This was revised up from the 3.7 percent growth that was reported last month.
U.S. consumer sentiment fell in September compared to the previous month, according to a survey released Friday. The University of Michigan’s final September reading on the overall index on consumer sentiment came in at 87.2, down from 91.9 in August.
French consumer confidence strengthened in September to the highest level in almost eight years, figures from the statistical office INSEE showed Friday. The consumer confidence index rose to 97 in September from 94 in the previous month, which was revised up from 93. Economists had forecast the same score of 94.0 for the month.
The Japanese government downgraded its economic view for the first time since last October as it sees risks from slowdown in China and normalization of interest rate in the U.S. In its monthly report, the Cabinet Office said Friday the economy is on a moderate recovery, while slowness can be seen in some areas.
The material has been provided by InstaForex Company – www.instaforex.com