Gold is trading below the key level of $1300 on Wednesday. The metal dropped below this barrier on Tuesday for the first time in about a month, following remarks by Janet Yellen about a possible rate hike. In Wednesday's European session, the spot price stands at $1297.88 per ounce. Gold has taken a tumble, dropping about 3% so far this week. The Fed chair continues with her testimony on Wednesday, this time before the House Financial Services Committee. Today's US highlight is PPI, with the markets expecting a small gain of 0.2% for the June release.
The dollar responded positively to Fed chair Yellen's testimony before a Senate committee on Tuesday. Yellen stated that given current economic conditions, monetary stimulus was still required, but rates could increase sooner than expected if inflation and job numbers improved more quickly than forecast. The markets were quick to give a thumbs-up to the prospect of earlier rate increases, and EUR/USD continues to lose ground. The Fed's asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.
US retail sales releases, the primary indicators of consumer spending, marked the first key events of the week. Retail Sales slipped to 0.2%, well off the estimate of 0.6%. There was better news from Core Retail Sales, which excludes the most volatile items included in Retail Sales. The indicator improved to 0.4%, a three-month high. This was just shy of the estimate of 0.5%. There was excellent news from the manufacturing sector, as the Empire State Manufacturing Index jumped to 25.6 points, its third straight rise.
XAU/USD 1298.18 H: 1299.50 L: 1294.96
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