Investing.com -- Gold fell slightly from eight-month highs from the previous session, in spite of a broadly stronger dollar, as investors traded cautiously on Tuesday ahead of a highly-anticipated appearance by Federal Reserve chair Janet Yellen.
On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,186.10 and $1,199.30 an ounce, before settling at $1,197.20, down 0.70 or 0.06%. It came one session after gold surged by more than 3% at session highs to reach its highest level since mid-June. Despite the slight losses, the precious metal is still up by nearly 7% over the last week and by more than 12% since early-December when they fell to a six-year low.
Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,222.60, the high from May 18.
For the most part, investors were reluctant to make any major trades before Yellen's semi-annual testimony on Wednesday in front of the U.S. House of Representative's Financial Services Committee. Yellen will make her first public appearance in 55 days and her first since the Fed kick started its first tightening cycle in nearly a decade with its historic decision in December to abandon a seven-year zero interest rate policy. Last month, as expected, the Federal Open Market Committee (FOMC) voted unanimously to leave its benchmark Federal Funds Rate at its current rate between 0.25 and 0.50%.
The current climate in global financial markets has changed dramatically since Yellen last spoke publicly before Christmas. Over the last two months, oil has plunged to 12-year lows below $30, the Dow Jones Industrial Average has lost approximately 1,700 and U.S. fourth quarter GDP slumped to 0.7%, considerably below initial expectations of 2%. Arguably, conditions are even worse abroad. In China, GDP growth expanded at its lowest level in a quarter century last year, while in the euro zone stocks plummeted to a 16-month low on Monday, as the financial sector continues to recoil in large part due to the crippling effects of negative interest rates.
As a result, investors have sought protection in gold, which is viewed as a safe-haven asset in periods of heightened financial instability.
Yellen could address prospects of softer U.S. economic growth, tighter financial conditions and troubles abroad in the first of her two-day appearance on Capitol Hill. The most pressing issue could be the Fed's median forecast for the Fed Funds Rate, which suggests that the U.S. central bank could approve up to four rate hikes this year. While the general consensus among analysts is that Yellen could offer concessions on the pace of its tightening, she could also vigorously defend the Fed's decision to normalize monetary policy in mid-December. Before Yellen begins her testimony at 10 a.m. EST, the Fed will release its semi-annual Monetary Policy Report. Legislators who parse through the fine print, could receive critical updates from the Fed on the amount of liquidity in bond markets and the levels of slack in the labor market.
Any rate hikes this year are viewed as bullish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 1% on Tuesday to an intraday low of 95.68, its lowest level since late-October. The dollar has tumbled nearly 3.5% since the FOMC released its latest monetary policy statement on Jan. 27.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery gained 0.039 or 0.25% to close at 15.465 an ounce.
Copper for March delivery plunged 0.051 or 2.46% to 2.040 a pound.
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