Gold Price Steady as Fed Chair Yellen Delivers Speech

A financial crisis will likely “not happen soon” as the economy is much “safer” now, US Federal Reserve Chair Janet Yellen said in a speech delivered in Europe on Tuesday (June 28).
The gold price was trading at $1,248.47 per ounce ahead of Yellen’s presentation, but rose slightly to $1,250.27 after it was over.
“Would I say there will never, ever be another financial crisis? You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be,” Yellen said at the London-based event.
Yellen also said the Fed has learned lessons from the financial crisis and has brought stability to the US banking system.
Earlier on Tuesday, Philadelphia Fed President Patrick Harker supported the positive US economic outlook, saying that the Fed rightly plans to raise rates once more this year, given that recent inflation weakness is likely temporary.
The Fed has raised interest rates twice this year, and they are now between 1 and 1.25 percent.

“I think at this point the Fed is more or less committed to raising rates as they’re more worried about being behind the curve and reloading the gun in case of a recession,” said Brad McMillan, chief investment officer for Commonwealth Financial.
That could be bearish for the gold price, which tends to fare better when interest rates are low and often struggles when interest rates increase. That’s because higher rates curb the investment appeal of non-interest-bearing assets like gold.
“The market is sceptical about Fed rate rises this year and next. Overall we’re optimistic about the outlook for gold, we [see] a weaker dollar later in the year,” ABN AMRO Bank (AMS:ABN) analyst Georgette Boele said.
The US dollar tumbled ahead of Yellen’s speech, slipping 0.6 percent against major currencies. Its fall supported gold’s gains, as a softer greenback makes commodities priced in dollars cheaper for buyers using weaker currencies.
Federal Reserve policymakers will meet two more times later this year, in September and December, and could announce further interest rate increases if their forecast for the economy remains unchanged.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.