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Gold rises after Yellen speech as investors await Draghi

Key Points
  • Fed's Yellen makes no mention of monetary policy.
  • Geopolitical concerns support prices.
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Gold firmed on Friday after U.S. Federal Reserve Chair Janet Yellen made no mention of monetary policy in her much-anticipated speech, while investors awaited clues from European Central Bank President Mario Draghi.

U.S. short-term interest rate futures rose slightly, reflecting reduced expectations that the Fed will raise interest rates further this year, after Yellen skipped mention of it when speaking in Jackson Hole, Wyoming.

"That relieved the market of a little bit of concern about that," said Bill O'Neill, partner with Logic Advisors in Saddle River, New Jersey, adding this was positive for gold prices and pressured the dollar. "She clearly came off dovish, saying maybe we need a few changes in bank regulation, but they should be modest."

Gold is highly sensitive to rising interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the greenback. Draghi is scheduled to speak at the Jackson Hole central bankers meeting at 1900 GMT. Monday is a bank holiday in the United Kingdom.

Spot gold was up 0.5 percent at $1,292.14 an ounce was on track to close the week up 0.6 percent.

U.S. gold futures settled up 0.5 percent at $1,297.90.

Gold beating stocks

Earlier, Dallas Fed President Robert Kaplan called for patience on raising interest rates any further but urged speed in reducing the Federal Reserve's balance sheet.

U.S. data showed home resales unexpectedly fell in July to an 11-month low as a chronic shortage of properties boosted prices, the latest sign that the housing market recovery was slowing. Weekly jobless claims rose, and new orders for key U.S.-made capital goods were better than expected in July.

Escalating geopolitical concerns were also preventing gold prices from retreating significantly, market participants said.

U.S. President Donald Trump said on Thursday that congressional leaders could have avoided a "mess" over raising the U.S. debt ceiling if they had taken his advice. Gold is used as an alternative investment during times of political and financial uncertainty.

Palladium fell 0.2 percent to $929.90 per ounce after reaching $940.50, a 16-1/2 year high. It was on track to close the week up 0.5 percent, its third straight weekly rise.

"We believe that barring short-term corrections, likely driven by profit-taking given elevated tactical positioning, the palladium market is fundamentally constructive over the next couple of years," Standard Chartered said in a note, adding that both NYMEX and industry stocks were falling.

Silver rose 0.9 percent to $17.07 an ounce, while platinum was down 0.6 percent at $972.99 an ounce.

Gold doing something it hasn't since 2011