Gold is trading just shy of the key $1300 level on Thursday. In the European session, the spot price stands at $1299.07 per ounce. On the release front, it's a busy day with three key events, Building Permits, Unemployment Claims and the Philly Fed Manufacturing Index.
Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. 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.
Recent US inflation numbers have been weak, so the markets were pleasantly surprised with the June release of the Producer Price index, the primary gauge of inflation in the manufacturing sector. The index improved to 0.4%, beating the estimate of.0.2%. Core PPI, which excludes volatile items, posted a weak gain of 0.2%, matching the estimate. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, stronger inflation numbers such as the June PPI will put more pressure on the Fed to raise rates.
XAU/USD 1299.07 H: 1308.22 L: 1303.90
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