Gold snaps three-session losing streak as dovish Yellen stings dollar

Gold futures snapped a three-session losing streak to settler higher Tuesday after Federal Reserve Chairwoman Janet Yellen stressed that the central bank will be cautious on any future interest rate hikes, quashing speculation that the Fed could raise rates as early as April.

June gold GCM6, +0.42% advanced $15.50, or 1.3%, to settle at $1,237.50 an ounce. The SPDR Gold Trust GLD, +1.85% added 1.6%.

Yellen’s dovish tone hurt the U.S. dollar as rising interest rates bolster the U.S. currency at the expense of metals that don’t bear interest, including gold and other dollar-priced commodities.

The U.S. Dollar Index DXY, -0.82% a measure of the buck against six rivals, slid 0.8% to 95.19 Tuesday.

Read: Dollar drops as Yellen implies rates will stay lower for longer

In a speech at The Economic Club of New York, Yellen said the central bank will need to be circumspect given the risky economic outlook and stressed that it is too early to determine whether the rise in core inflation will be sustained.

Yellen also said the U.S. central bank will introduce more bond purchases and swaps should the economy stumble but she didn’t specifically mention negative interest rates.

“This speech will presumably kill any speculation that the Fed might somehow raise rates in April,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a note following Yellen’s appearance.

The chairwoman’s remarks Tuesday echo the Fed’s policy statement from earlier this month which had underscored its desire to go slow on hiking interest rates. Still, speculation had emerged in recent days that the central bank could tighten monetary policy as early as next month.

“Her comments were very dovish and the rate hike expectations are pushed towards the early start of 2017, according to the Fed fund rate,” said Naeem Aslam, chief market analyst at AvaTrade. “However, it will be naive to read too much into this as we do know that other members on her team are aching to lift the rates again.”

Gold had traded higher all session on the heels of the S&P/Case-Shiller 20-City Index, which at up 5.7% for the year and up 0.7% in January suggested that consumer prices are rising. Gold tends to be viewed as an inflation hedge.

Ken Ford, president of Warwick Valley Financial Advisors, said gold may be on a longer-term bullish run as central banks, including the U.S. Fed, wrestle with sluggish global growth. “From a longer-term-trend perspective, gold may have turned the corner,” Ford said. Gold prices are up some 17% so far in 2016.

Meanwhile, May silver SIK6, +0.87% gained 4 cents, or 0.3%, to settle at $15.23 an ounce. May copper HGK6, -0.09% fell 3 cents, or 1.4%, to close at $2.21 a pound, July platinum PLN6, +0.37% rallied $20.80 or 2.2%, to close at $967 an ounce, while June palladium PAM6, +1.97% rose $6.20, or 1.1%, to close at $573.20 an ounce.

By Sue Chang and Rachel Koning Beals

Published: Mar 29, 2016 2:51 p.m. ET