Gold prices ended lower on Tuesday after US Treasury Secretary Janet Yellen suggested that the Federal Reserve may need to raise interest rates to keep the economy from overheating.
Yellen does not set interest rate policy at the Treasury, but she used to head the Fed.
In an interview with The Atlantic, which was recorded Monday and circulated on Tuesday, Yellen said: “It is possible that interest rates will need to rise slightly to keep our economy from overheating, even if the additional costs are relatively small compared to the size of the economy.”
Until last week, incumbent Fed Chairman Jerome Powell “surpassed all expectations of interest rate hikes,” said Chintan Carnani, director of research at Insignia Consultants. Yellen could prepare markets for the June interest rate hike if US economic growth continues well in May, he said.
The US dollar continued to rally following Yellen’s comments, according to the ICE US Dollar Index DXY, which rose 0.4% to 91.266. A stronger dollar could erode demand for currency-denominated assets.
“The gold market changed overnight, even with a hint of higher interest rates in strategic plans,” said Jeff Wright, Chief Investment Officer of Wolfpack Capital to MarketWatch. “Yellen has a lot of influence,” although she is no longer a member of the Fed.
Previously, the gold market “had some interest in safe havens as US stocks plummeted and tensions between China and Taiwan increased,” but after Yellen’s quote, “any positive movement in gold has evaporated,” Wright said.
June gold GCM21,
lost $ 15.80, or 0.9%, to $ 1,776 an ounce after rising 1.4% on Monday, helping the metal reach its highest settlement level for the most active contracts since April 21, data from FactSet show.
July silver SIN21,
fell 40 cents, or 1.5%, to $ 26.56 after a 4.2% gain that resulted in the largest one-day reading and percentage gains in the metal-sister of gold since February.
Prior to Yellen’s speech, gold prices were moving modestly and found some support in a risk-averse response to the downturn in the US stock market.
US stock indices traded lower on Tuesday amid strong losses in technology stocks.
Among other metals traded on the Comex, palladium stood out as prices based on the most active contracts hit an intraday high above $ 3,000 an ounce before settling into a loss.
To read: Palladium hit a record high of $ 3,000 an ounce.
June Palladium PAM21,
fell 0.1% to $ 2,977.60 an ounce after trading to $ 3,019. The intraday peak is a new record, according to Dow Jones Market Data.
Analysts at Zaner said that after Tuesday’s very strong US car sales were released, “expectations for demand for other non-palladium products are rising.” Palladium is used in catalytic converters for gasoline vehicles.
Ford Motor Co. F,
said on Tuesday that total US auto sales in April rose 64.8% year over year to 197,813 vehicles.
Meanwhile, the July platinum is 21 zloty,
added 0.1% to $ 1231.80 an ounce, while July copper HGN21,
fell nearly 0.2% to $ 4.52 a pound.
To read: BofA warns that the world is in danger of “running out of copper” – and here’s how prices could rise when the economy reopens.