Gold climbs as Yellen testimony curbs dollar, U.S. yields

Source: World Gold Council

Gold rose on Wednesday after comments from Federal Reserve Chair Janet Yellen curbed speculation that U.S. interest rates would rise more than once this year.

In testimony for delivery to Congress, Yellen said the Fed would not need to lift rates all that much further to reach current low estimates of the neutral fed funds rate.

That weighed on the dollar and U.S. Treasury yields, helping lift gold further from Monday's near four-month low.

Spot gold was up 0.18 percent at $1,219.45 an ounce, having fallen to its weakest since early April at $1,204.45 an ounce early in the week

U.S. gold futures for August delivery settled at $1,219.10.

Saxo Bank's head of commodity research Ole Hansen said much further movement in gold on Wednesday would depend on Yellen's answers to questions after her prepared testimony is delivered.

"Bonds are holding onto gains, while the Japanese yen failed to extend its gain," he said. "A long Q&A awaits, so let's see. $1,230 and $16.20 are key levels in gold and silver, above which short-covering could be forced."

The dollar slipped and U.S. Treasury yields fell after Yellen said the central bank would not need to raise interest rates "all that much further."

Immediately after her statement, federal funds futures implied traders saw a 53 percent chance the Fed would raise key overnight borrowing costs at its December meeting, down from 60 percent beforehand, according to CME Group's FedWatch program. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

In the major physical markets, Commerzbank said in a note that higher imports into number two consumer India, reported the previous day, could prove to be the last to show such strength for a while.

"Indian gold traders are likely to have brought purchases forward because a goods and services tax was introduced on gold purchases in India on 1 July," it said. "Many market observers expect imports to be significantly lower in the second half of the year, meaning that the gold price will lack this important crutch for some time."

Among other precious metals, silver, which hit its lowest since April last year during a flash crash on Friday at $14.86, was up 1 percent at $15.93 an ounce.

Palladium was 1.29 percent higher at $860.97 an ounce while platinum was up 1.23 percent at $912.10 an ounce. The white metal slipped to its lowest this year on Tuesday, at $886.15 an ounce.