By Tatyana Shumsky Gold prices fell to their lowest level in eight months after Federal Reserve Chairwoman Janet Yellen said the U.S. central bank is on track to raise interest rates later this year.
Gold for August delivery, the most actively traded contract, fell $6.10, or 0.5%, to settle at $1,147.40 a troy ounce on the Comex division of the New York Mercantile Exchange. This was the lowest level since Nov. 6, when prices hit a four-year low of $1,142.60 an ounce.
Prices in the $53 billion market have been under pressure for months as investors prepare for lower U.S. interest rates, which would hamper gold's ability to compete with yield-bearing assets, such as Treasury bonds. Momentum in the U.S. recovery has also damped demand for the precious metal, which is often bought as a haven from economic instability.
On Wednesday, prices marched lower after Ms. Yellen told Congress that the economy has continued to improve despite a backdrop of turmoil overseas, and that the Fed is on track to raise interest rates for the first time in nearly a decade later this year.
"The fact that the Fed is as committed as she made it sound to raising rates definitely spooked the gold market," said Bob Haberkorn, a senior commodities broker with RJO Futures in Chicago. "Her comments are going to put extreme pressure on gold for the remainder of the year, especially going into any Fed decision."
Gold prices have dropped 12% from their 2015 peak of $1,300.70 an ounce and are less than $5 away from a five-year low.
The decline in gold prices is a signal that "the interest rate hike is coming," said John Payne, senior market analyst with Daniels Trading in Chicago.
A stronger dollar, which rallied in response to Ms. Yellen's testimony, also pressured gold lower. Gold and other precious metals are traded in dollars and become more expensive for investors who use weaker currencies to fund their metals purchases.
The Wall Street Journal Dollar Index was recently up 0.6% at 88.06.
Other precious metals also pulled lower, with platinum futures extending their six-year low. Nymex platinum for October delivery fell 0.7% to settle at $1,021.70 an ounce, the lowest close since February 2009.
Silver fell 1.7% to $15.048 an ounce, while palladium closed 2.2% lower at $642.90 an ounce.
Write to Tatyana Shumsky at tatyana.shumsky@wsj.com
(END) Dow Jones Newswires
July 15, 2015 14:39 ET (18:39 GMT)
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