Gold Rally Fades A Bit After Fed Speeches

Noting strong United States job growth, Yellen said gradual increases in the Fed’s benchmark rate in the coming years should be expected.

Yellen told the gathering of central bankers from around the world the USA economy was nearing the central bank’s goals of maximum employment and price stability but she maintained that future hikes should be “gradual”.

The U.S. currency had given up gains soon after Yellen spoke to central bankers, as she gave no indication that a rate hike was imminent. “She strongly is keeping that in place, I think she’s putting the emphasis on the data and how the labor market performs, and that’s really what we should be watching”. Citing continued expansion in US economic activity, especially housing spending, plus an inflation rate running below the FOMC’s desired two percent level, Yellen wondered aloud if this was the right time for another rate increase.

The U.S. economy has improved in recent months to the point where near-crises levels of rates are not justified, Yellen said in her widely anticipated speech at the Economic Policy Symposium in Jackson Hole, Wyo. on Friday.

She said the Fed still planned in the future to wind down its massive balance sheet but that it would take time, adding that the balance sheet was likely to be useful for policy for some time. Others say they foresee no action until December, after the elections, at the earliest.

The FOMC has said uncertainty of the Brexit vote earlier this summer put off a rate hike. Investors are seeking some sign that Prime Minister Shinzo Abe’s massive stimulus programmes are having an effect, after figures on Friday showed a decline in consumer prices by the most in three years in July.

Some economists have said they think conditions are ripe for the Fed to alert investors that it may be inclined to act at its next policy meeting, September 20-21.

“The monetary stimulus and negative interest rate policies of several central banks outside the U.S. continue to drive demand for U.S. Treasury bonds as investors search for positive yields, despite abating concerns over the fallout from Brexit”, Fleming said.

The case for a U.S. rate hike has strengthened in recent months, with a lot of new jobs being created, and economic growth looks likely to continue at a moderate pace, Yellen said in a speech at the Fed’s annual monetary policy conference in Jackson Hole, Wyoming, on Friday.

“For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets”, she said. But she said those options would require more study.

“It was completely in line with most expectations”, Drilling said in an interview. Growth hasn’t topped 3% for a full year since 2005.

Yellen was the lead-off speaker Friday for the annual conference sponsored by the Federal Reserve Bank of Kansas City.

That’s a very direct statement – unusually so for the Fed leader.

But what holds for now is the takeaway from Yellen’s speech. So the question is: are you taking a lot of risk there?

“Our communities are being sacrificed for an inflation enemy that isn’t here”, said Rod Adams, a community organizer for Neighborhoods for Change in Minnesota.

Divergent views from Fed officials in recent weeks have kept markets guessing about the bank’s intentions.