Gold prices headed lower on Tuesday after U.S. Treasury Secretary Janet Yellen suggested that interest rates may need to rise to keep the economy from overheating.
The U.S. dollar extended its gains after Yellens comments, as measured by the ICE U.S. Dollar Index, which up 0.4 at 91.311. A stronger buck can undercut demand for assets priced in the currency.
In an interview with the Atlantic that was recorded Monday and aired Tuesday, Yellen said, It may be that interest rates will have to rise somewhat to make sure that our economy doesnt overheat, even though the additional spending is relatively small relative to the size of the economy.
The gold market turned around instantly with even a hint of higher interest rates in policy plans, Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. Yellen holds a lot of influence even though shes no longer a part of the Federal Reserve.
Earlier, the gold market was seeing some safehaven interest as U.S. equities pulled back and tensions rise between China and Taiwan, but after the Yellen quote, any positive movement for gold evaporated, said Wright.
June gold was off 19.10, or 1.1, at 1,772.70 an ounce, following a 1.4 gain on Monday that helped the metal notch the highest settlement for a mostactive contract since April 21, FactSet data show.
July silver dropped 73 cents, or 2.7, to trade 26.24, following a 4.2 gain that drove golds sister metal to its biggest singleday point and percentage gain and…