Gold fell to its lowest in nearly six years on Wednesday, extending losses as Federal Reserve Chair Janet Yellen said she was "looking forward" to an interest rate hike that will mark the US economy's recovery from recession.
In prepared remarks, Yellen did not indicate if she still expected a rate hike would be warranted at the Fed's last remaining policy meeting this year on Dec. 15-16.
Her comments lifted the US dollar to its highest against the euro in more than seven months. Bullion prices slightly pared losses when the Fed later said in its Beige Book report that the US labour market tightened modestly in recent weeks with some upward pressure on wages and that US economic activity continued to expand at a modest pace in most regions.
Spot gold was down 1.4 percent at $1,053.70 an ounce at 3:25 p.m. EST (2025 GMT), having fallen to the lowest since February 2010 at $1,050.25. US gold futures for February delivery settled down 0.9 percent at $1,053.80 an ounce after falling to the lowest since October 2009 at $1,049.40. Prices have been pressured by expectations that the Fed will raise rates for the first time in nearly a decade this month, even as the European Central Bank is expected to ease policy further at a Thursday meeting.
Rising rates would lift the opportunity cost of holding non-yielding gold, while boosting the dollar. "Janet Yellen suggested that the economy continues to grow at a moderate pace, but evidence from the Beige Book indicates a slightly softer trend," said Andrew Grantham, senior economist and director of CIBC Economics, in a note.
Gold prices were already pressured by data showing US private employers added a greater than expected 217,000 jobs in November. "Essentially the ECB and Friday's nonfarm payrolls look quite negative for precious metals, given the likelihood of further strengthening of the dollar on the back of potential quantitative easing in the euro zone, and further US jobs growth," Mitsubishi analyst Jonathan Butler said. Silver was down 1.1 percent at $14.04 an ounce, while platinum was down 0.8 percent at $831.74 an ounce and palladium was down 1.9 percent at $528.15 an ounce.
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