Gold prices firm after comments by Janet Yellen

Camille Rivera
September 28, 2017

Cape Town - The rand lost more than 1.5% against the U.S. dollar on Wednesday, breaking through the level of R13.50/$ for the first time in nearly three months as the greenback rallied on rate hike hopes.

Wall Street looked set to open higher, index futures showed.

The greenback, which rose on Tuesday after Federal Reserve Chair Janet Yellen said the Fed needs to continue gradual rate hikes despite broad uncertainty about the path of inflation, added to gains on Wednesday after better-than-expected US core capital goods data. The large-cap S&P 500 Index closed flat at 2,496.84.

"Yellen's comments have been broadly positive for the dollar, firming up probabilities for a December hike but we have quarter end coming up and there are the Chinese holidays next week so would be careful to read much into these moves shorter-term", said Josh Byrne, an FX strategist at Citibank in London.

Banks put in a solid performance amid expectations of higher interest rates, with Standard Chartered, Lloyds and RBS among the top gainers, although StanChart was also boosted by an upgrade to "hold" from "sell" at Investec.

The greenback is also benefiting from talk that USA tax reform announcements are imminent. They were his first extended remarks on monetary policy since taking office.

U.S. stocks pared gains Wednesday after U.S. President Donald Trump's administration called for slashing tax rates.

Looking ahead, investors will be watching for the Reserve Bank's monetary policy decision on Thursday. A weaker euro - a boon for exporters - pushed European equities higher. The U.K.'s FTSE 100 Index settled down 0.2%.

-Hong Kong's Hang Seng Index added less than 0.1 percent after slumping 1.4 percent on Monday as Chinese property developers tumbled on fresh mainland home curbs. The index had been expected to dip by 0.5%.

The euro was down by 0.5% at 1.1789 against the dollar. The single currency traded close to $1.21 earlier this month but was rattled by Sunday's German election, which brought the far-right Alternative for Germany (AfD) party into parliament. In the previous session, prices fell 1.3% in what was the biggest loss in over two weeks. Treasury yields and stocks edged slightly higher.

Nasdaq 100 e-minis were up 5.5 points, or 0.09 percent, on volume of 29,784 contracts.

OIL: Benchmark U.S. crude rose 24 cents to $52.12 per barrel on New York Mercantile Exchange.

Brent, the global benchmark oil price, fell as far as $57.83 a barrel, having hit $59.49 on Tuesday. It rose to 80.99 yen from 80.78 yen and traded at 53.63 British pence from 53.73 pence. "At this stage the fundamentals are very supportive of stronger prices", ABN Amro analyst Casper Burgering said.

The most-active gold contract for December's delivery fell $9.80, or 0.75 percent, to settle at $1,301.70 per ounce.

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