Gold Prices Remain Positive Following Yellen Comments Supporting December Rate Hike

His promises to ramp up spending on infrastructure and cut taxes has led to warnings of a surge in inflation that would force the Fed to hike rates to cap prices.

The yield on the benchmark 10-year Treasury note (U.S.:US10Y), which moves inversely to its price, was higher at 2.339 percent, while the yield on the 30-year Treasury bond was slightly higher, at 3.025 percent.

“Yellen’s prepared remarks followed by strong economic data for October (including the earlier released data on strong retail sales in October and September supported by strong sales gains just reported by Target, Wal-Mart and Best Buy) all but guarantee a December funds rate hike by the FOMC”, said Stuart Hoffman, chief economist of PNC. It now looks nearly impossible for the Fed not to raise rates next month – it’s painted itself in a corner and has to respond with a hike or all hell will break loose in the markets. Warehouse club operator Costco lost $1.86, or 1.2 percent, to $150.28 and grocery store chain Kroger slid 75 cents, or 2.2 percent, to $32.95.

U.S. consumer prices recorded their biggest increase in six months in October on rising gasoline costs and rents.

In her first public statement since the United States election, Yellen told lawmakers that the Fed is close to boosting borrowing costs as the economy continues to gain traction.

“Gradual increased in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years”, Yellen said. She added that the central bank still sees “scope for some further improvement”. “If you think about what Mr. Trump is going to do in his new economic policy, it is very, very inflationary, the interest rate is most likely to rise, and the dollar is most likely to rise too”. Trump’s new appointees potentially could affect that consensus. The Fed last raised its benchmark rate in December, and it stands at between 0.25 percent and 0.5 percent. The BOJ on Thursday offered to buy an unlimited amount of Japanese government bonds at fixed rates for the first time since the introduction of a new policy framework in the first clear sign that the central bank intends to take action to keep a lid on rising yields following a recent global bond rout. “After rising at an annual rate of just 1% in the first half of this year, inflation-adjusted gross domestic product is estimated to have increased almost 3% in the third quarter”. She said the committee made a decision to hold off on raising rates at their meeting earlier this month after judging that there was “somewhat more room” for the labor market to improve than they expected at the beginning of the year.

The housing market, whose meltdown triggered the 2008 financial crisis and the recession, has largely recovered, though. Bond prices have fallen hard since the election and yields are now at their highest in a year.

Yellen mostly reiterated what was expressed in the November Federal Open Market Committee meeting, saying officials needed further evidence of an improving economy.