Yellen, 67, delivered her first public address as the central bank head today and pledged to maintain the Fed’s policy for scaling back debt purchases in “measured steps,” the text of her remarks to the House Financial Services Committee showed. Investors shunned gold in 2013, sending prices lower for the first time since 2000, partly as the outlook for less monetary easing signaled tame inflation.
Turmoil in emerging markets drove gold 6.5 percent higher in 2014, after a 28 percent drop last year that was the biggest since 1981. In January, U.S. payrolls rose less than forecast, while the jobless rate unexpectedly fell, the government said Feb. 7. Volatility that erased about $1.4 trillion from the value of global equities this year doesn’t yet “pose a substantial risk to the U.S. economic outlook,” Yellen said.
“The threshold for the Fed to stop tapering is very high, so until people see a clear signal from the Fed, gold may not really start rushing higher,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion of assets, said in a telephone interview. “People have been reassessing global growth, and this year we have seen some money flow into gold, but it’s too early to say that it’s a turning point.”
Gold futures for April delivery advanced 0.7 percent to $1,284.10 an ounce at 10:16 a.m. on the Comex inNew York, after reaching $1,288.30, the highest since Nov. 18. Prices are up for a fifth day, the longest streak since August 2012.
The Fed reduced its monthly bond purchases to $65 billion from $85 billion during its last two meetings, citing signs the labor market is recovering.
Gold surged more than 500 percent in the 12 straight years of gains through 2012 as the dollar weakened. The rally accelerated from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases and held borrowing costs at a record low in a bid to revive growth amid a U.S. recession. Bullion reached a record $1,923.70 in September 2011.
Prices fell into a bear market in April after some investors lost faith in the metal as a store of value. The declines helped spur physical demand. Sales of American Eagle gold coins by the U.S. Mint rose 63 percent in January to the highest since April. In 2013, Chinese consumption surged 41 percent from a year earlier to a record 1,176.4 metric tons, according to data from the China Gold Association yesterday.
While climbing physical demand “is supportive, it cannot really determine the direction of prices,” Quincy said.