Gold Prices Wither on Fed Comments

Gold futures today slumped to a 2-year low on the trail of comments made by a senior member of the Federal Reserve, the Fed Vice Chairman Stanley Fischer. Spot gold prices orbited around $1,333.40 an ounce in most of today’s trading session after the Fed Vice Chairman spoke to a conference in Aspen, Colorado on Sunday, where he stated that an interest rates hike this year was still much in the picture and that there would be a major upswing in the US economic growth.

Joni Teves, UBS strategist, told CNBC on Monday that, “I think that as U.S. data has surprised to the upside recently … the Fed prepares for a hike … it is understandable that gold comes under pressure, especially in these quiet summer months when liquidity is not great."

Gold has grown by over 25% since the start of 2016, mostly due to the high demand for “safe haven” investments in light of the looming global economic uncertainty and decreased bond yield environment.

Gold opened its week in Asia by falling sharply, closely joined by silver as investors hopes for a near term rate hike by the Federal Reserve peaked. December delivery for Gold on the Comex division of the New York Mercantile Exchange fell by 0.37% to $1,341.25 a troy ounce. Silver for September delivery also fell by about 1.8% to $18.9 a troy ounce, as a decline in September delivery for Copper futures was also witnessed with its price orbiting a flat $2.171 per pound.

"Apart from January, we have a pretty positive rally and that has been very much helped by the China simmers we saw at the start of the year," David Wilson, director of metals research and strategy at Citi, told CNBC on Monday. He said this year's rally in commodities was a slightly overblown.

"It did feel like things had got a little bit too ahead of themselves as we were coming into the middle of the year," Wilson told CNBC. However, with bond prices at record highs, boosted by asset-buying programs from the likes of the Bank of England, Teves said gold would continue to benefit from the "global yield hunt." Further adding that, "I think there is also a lot of uncertainty as to how central banks can normalize policy and I think that is underpinning gold at the moment."

The highly anticipated Jackson Hole Economic Symposium which will have many economists and bankers in attendance with a speech the by Fed Chair Janet Yellen as its spotlight event, many market participants will be listening closely for any hints concerning a short term rates hike by the Fed. Gold prices closed last week’s Friday session deep in the red, after the release of fresh spates of comments from the key Federal Reserve policy makers who earlier debated the timing of an interest rates hike by the US central bank.