By Marcy Nicholson and Jan Harvey
NEW YORK/LONDON (Reuters) - Gold extended gains above 1 percent on Friday, breaking a five-day streak lower after Federal Reserve Chair Janet Yellen said the case for raising U.S. interest rates has strengthened, although increases should be gradual.
Yellen pointed to improvements in the U.S. labor market and expectations for moderate economic growth, reinforcing the view that such a move could come later this year. She did not, however, lay out a clear roadmap for what the Fed needs to see to raise rates.
"After the initial Yellen headlined-induced stumble, gold has rallied impressively, helped by a weakening dollar," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"Short-term, holding support above $1,315 (an ounce) ?may let the recently listless gold bull convalesce in the familiar and safe $1,330-$1,360 range," he added.
The U.S. dollar index fell as much as 0.6 percent as Yellen spoke, but then pared losses, and Wall Street stocks rose. [FRX/]
Also Read
Spot gold was up 0.9 percent at $1,333.68 an ounce at 11:07 a.m. EDT (1507 GMT), after rising 1.5 percent to $1,341.60. The spot price hit a four-week low on Thursday of $1,317.46 an ounce.
U.S. gold futures for December delivery were up 0.9 percent at $1,335.90.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.
Fed policymakers are seen as sharply divided over whether to increase rates soon or take a more cautious approach.
"Yellen's highly anticipated remarks at Jackson Hole had a hawkish tilt... although with the usual caveats that the timing will be based on how the data unfold," said Avery Shenfeld, chief economist for CIBC Capital Markets.
"Overall, there really is no big surprise here, so we can put the Fed hype aside for now."
The metal slid for the past five sessions, extending losses on Thursday after U.S. jobless and durable-goods data beat forecasts and Kansas City Fed President Esther George said it was time for the Fed to raise rates gradually.
Gold discounts in India hit near three-month lows this week, while buying gathered steam elsewhere in Asia as lower prices and festive buying lifted demand for the metal. [GOL/AS]
Silver was up 2 percent at $18.87 an ounce, after hitting an eight-week low of $18.46 on Thursday.
Platinum was 1 percent higher at $1,078.75, after falling to a 7-1/2-week low of $1,059.50. Palladium was up 1.2 percent at $692.30.
(Additional reporting by Nallur Sethuraman in Bengaluru; Editing by Susan Thomas and Dan Grebler)
Disclaimer: No Business Standard Journalist was involved in creation of this content