Yellen walks the rate hike tightrope

The gold price has eased off in the aftermath of Janet Yellen’s testimony to congress, but a more balanced tone to the delivery allowed for a healthy balance between keeping markets perky and gold steady.

Yellen reaffirmed the Federal Reserve’s (The Fed) plan to increase interest rates, but emphasised the gradual nature of the hike. Gold had risen slightly on Wednesday as no drastic measures by the Fed looked likely, but this also had the effect of reassuring the stock market that a downturn resulting from higher interest rates wasn’t on the cards.

The Dow Jones stock index increased by 0.10% to 21,553.091 points, the S&P 500 by 0.19% to 2,447.83 points and the NASDAQ by 0.21% to 6,274.44 points. Spot gold at time of writing lies at $1,219.23, down $2 since yesterday.

Yellen’s balanced demeanour can be summarised by the stated inclination towards a “neutral policy stance” resulting from interest rates not rising significantly.

“The main takeaway for gold investors should be Yellen’s continuous focus on ‘gradual’ rate hikes and balance sheet reductions, and this could be interpreted as fewer rate hikes with more time in between hikes than originally expected,” said Nico Pantelis, head of research at Secular Investor, in Marketwatch.

Photo: Janet Yellen, chair of the Federal Reserve. Credit: Gerald R. Ford School of Public Policy, University of Michigan, licensed under CC BY-ND 2.0

Link to this article: : http://www.goldmadesimplenews.com/gold/yellen-walks-the-rate-hike-tightrope-13276/

Posted by on Jul 14 2017. Filed under Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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