Gold prices climbed Wednesday, a day after the commodity finished lower on the back of comments from U.S. Treasury Secretary Janet Yellen, which were viewed as bearish for precious metals.
Yellen, formerly head of the Federal Reserve, initially suggested in an interview published Wednesday that the Fed may need to raise interest rates to rise to keep the economy from overheating.
However, the Treasury boss later clarified her remarks at The Wall Street Journal’s CEO Council Summit, saying that she was neither predicting nor recommending that the Fed raise rates. She also said that she didn’t anticipate inflation being a sustained problem for the economy as it bounces back from COVID.
“In the commodity sphere, gold was another casualty of Yellen’s communication mishap, suffering at the hands of rising Treasury yields and a firmer dollar,” wrote Marios Hadjikyriacos, investment analyst at XM, in a daily report.
Rising interest rates can undercut the appeal of owning gold because precious metals don’t offer a coupon.
June gold rose $5, or 0.3%, to trade at $1,781 an ounce, following a 0.9% decline on Tuesday, a fall that yanked the commodity down from its highest settlement for a most-active contract since April 21.
The XM analyst said that gold is still maintaining a fairly bullish posture despite its recent decline and could go higher still if the Fed remains accommodative in the face of rising inflation.
“On the bright side, the yellow metal is still trading safely above the critical $1765/ounce zone and if markets trust that the Fed will ‘hold the line’ even in the face of higher inflation, the summer months could be the sweet spot for bullion,” he wrote.
Meanwhile, July silver was off 11 cents, or 0.4%, at $26.45 an ounce, after settling 1.5% lower in the prior session.
In economic news Wednesday, Automatic Data Processing reported that U.S. businesses created 742,000 new jobs in April, the most in seven months. Gold prices fell in the immediate wake of the private-sector jobs report, then moved up sharply. The data come ahead of Friday’s monthly U.S. nonfarm payrolls report.
Separately, the ISM services sector activity survey released Wednesday showed a fall to 62.7% in April from 63.7%.
Looking ahead, commodity investors await a report on U.S. private-sector employment for April from Automatic Data Processing that could provide insights on the employment picture and help color trading in gold.
Among other Comex metals, June palladium tacked on nearly 0.2% to $2,982 an ounce. On Tuesday, it logged a record intraday high of $3,019.
The palladium market saw strong enough vehicle sales data recently to “add credence to the surging demand and tightening supplies arguments,” analysts at Zaner wrote in Wednesday report.
“On the other hand, the June palladium market has now failed at the $3,000 level on 3 separate occasions, and it could be difficult for the market to extend its pattern of new all-time highs if overall market psychology returns to the ‘risk-off’ condition” seen Tuesday, they said.
July platinum meanwhile, edged down by 0.2% to $1,229.40 an ounce. July copper traded at $4.53 a pound, up 0.1%.