Tuesday, 21 November, 2017

Gold Rally Fades A Bit After Fed Speeches

Federal Reserve Chair Janet Yellen Federal Reserve Chair Janet Yellen
Juana Turner | 06 September, 2016, 00:26

The U.S. central bank has been on the sidelines since it first raised interest rates last December after keeping them near zero following the sub-prime financial crisis that hit the global economy in 2008.

With an interest rate hike unlikely in the immediate future, the dollar was struggling to gain traction.

TORONTO, Aug 26 Canada's main stock index rose on Friday, led by energy and mining stocks as oil and gold prices gained after a speech by Federal Reserve Chair Janet Yellen viewed as supportive of a US interest rate increase.

Yellen's speech comes after some colleagues have been fairly upbeat in their assessments of the economy, which could mean they're eager to lift rates in the coming months.

There were positive elements in the report though, said currency strategist Vassili Serebriakov of Credit Agricole in NY.

The reason markets have been so calm about the next rate hike is that investors don't expect an ensuing hike until at least the fall of 2017.

Next week's publication of euro zone jobless data for July and August's figures for consumer sentiment and inflation, slowly on the rise from anemic levels, come ahead of the next meeting of European Central Bank governors on Sept 8.

The U.S. currency rallied after Yellen's speech but soon fell as investors digested some of its dovish details.

While U.S. economic growth has not been rapid, it has been "sufficient to generate further improvement" in the labor market, Yellen noted, adding that job gains averaged 190,000 over the past three months. At the beginning of the year, the Fed projected it would raise rates four times this year. Since then, slower growth overseas and market shocks caused by the Brexit vote in the United Kingdom has made the Fed extremely cautious.

The US. stock market on Friday appeared to take no heed of any hints on a rate hike, staying in positive territory even after Yellen's remarks. "On balance, it strengthened the case for a December move", said Bill Northey, chief investment officer for the private client group at U.S. Bank in Helena, Montana.

"Yellen succeeded in leaving the door open to nearly anything", says Kathy Jones, chief fixed income strategist at Charles Schwab.

Gold rose as much as 1.6 percent after Yellen said that while the case for a rate hike has strengthened recently, a gradual increase will be appropriate "over time", initially easing concerns that the Fed would make a move next month.

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