In a speech Friday at the annual Jackson Hole symposium of central bankers, Yellen said that the case for a USA rate hike had “strengthened,” sharply boosting the greenback.
Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
According to vice chairman Stanley Fischer, the Fed could act as soon as next month. Seven of the 10 sectors of the Standard and Poor’s 500 index had fallen, led by a 2.1 percent drop in utilities. Financial stocks stand to gain the most in a higher interest rate environment.
The dollar edged up on Tuesday, but mostly took a breather as investors waited to see if US employment data later this week would reinforce US Federal Reserve officials’ recent hawkish messages. Mylan hiked the price of the EpiPen from approximately $100 in 2009 to more than $600 in 2016. It surged 0.5% against the yen today, reaching its three-week high of 102.39.
Global stocks oscillated between losses and gains on Monday as investor anxiety triggered expectations to fluctuate over the Federal Reserve raising USA interest rates in September. “A pickup in consumer spending, on durables especially this time around, gives the Fed another little push”.
Following those comments, expectations for a Fed interest rate in September ticked up, with purchases of Fed funds futures reflecting that buyers see a 33 percent chance of a hike.
MSCI’s all-country world equity index was last down 0.04 points, or just 0.01 percent, at 418.38.
The SP 500 increased 0.55%, the Dow Jones Industrial Average gained 0.58%, and the Nasdaq added 0.37%.
The dollar index, which tracks the greenback against a basket of six major rivals, added 0.2 per cent to 95.714, though it remained shy of the previous session’s high of 95.834 which was its highest since August 12.
Platinum for October settlement ticked down 20 cents or less than 0.1 percent to $1,077.50 per ounce, while the most active palladium contract stood at $683.85 per ounce, down $8.30.
Oil prices fell for a second straight day in response to the dollar’s strength, but the downside was limited by production suspensions in the U.S. Gulf, due to an expected tropical storm. It now enjoys a 68 bps premium to Treasury 10-year yields despite Fed rate hike fears.
Oil prices fell, with benchmark Brent crude falling below US$49 a barrel, pressured by high output from Middle East OPEC members and as a stronger United States dollar weighed on commodities.
“The Fed has been careful to help set expectations for the market where appropriate, but without pigeonholing themselves into a decision that might run counter to the most recent data”, he said.
Brent crude (LCOc1) settled down 66 cents, or 1.32 percent, at $49.26 (37.5837 pounds) a barrel.
Spot gold was little changed at $1,323 per ounce at 0407 GMT.