Gold slips after Fed chairman says US needs gradual rate hikes

NEW YORK/LONDON — Spot gold dipped more than one percent after Federal Reserve Chair Janet Yellen said the central bank needed to continue gradual rate hikes, despite weak inflation.

“[This] is not what the market expected. We expected emergency accommodation with the very large debt that we’re facing,” said George Gero, managing director of RBC Wealth Management in New York, referring to Ms. Yellen’s statement that pressured gold prices.

Spot gold was down 1.13% at $ 1,295.28 per ounce by 3: 27 p. m. EDT ( 1927 GMT), while US gold futures for December delivery settled down 0.75% at $1,301.70.

Gold is highly sensitive to interest rates and returns on other assets, as rising rates lift the opportunity cost of holding nonyielding bullion.

“A little recovery in (US Treasury) yields, along with a stronger dollar has pressured gold. And the risk-averse trading from yesterday is easing off,” said James Steel, chief metals analyst at HSBC Securities in New York.

The US dollar index rose around 0.30% against a basket of currencies, making commodities including gold more expensive for holders of other currencies.

This came after the metal rose to a one-week high at $1,313.54 earlier in the session, extending gains after rising tensions between North Korea and the United States buoyed prices on Monday.

Bullion is used as an alternative investment at times of political and financial uncertainty.

US President Donald Trump warned North Korea on Tuesday that any US military option would be “devastating” for Pyongyang, but said the use of force was not Washington’s first option to deal with the North’s ballistic and nuclear weapons program.

Political uncertainty pushed down a gauge of world stocks.

In physical demand, China’s net gold imports via main conduit Hong Kong plunged 55% in August from the previous month, data showed.

Meanwhile, silver was down 2.04% at $16.83 per ounce, after dropping to $16.76 per ounce, its lowest since Aug. 25.

Platinum was down 1.58% at $925.30 per ounce, after reaching $918.75, the lowest since July 28.

Palladium was up 0.62% at $916.05 per ounce. —