(Kitco News) - Gold prices have fallen to a new 10-month low, dropping more than1% following optimistic comme
nts from Fed Chair Janet Yellen.
In her press conference, following the U.S. central bank’s decision to raise interest rates by 25 basis points and signaling that it sees the potential for three rate hikes next year, Yellen said that the U.S. economy has shown strong resilience in 2016. She added that the Fed’s projection of three interest rate hikes could be seen as a boost of confidence in future economic growth.
“I do not judge that we are behind the curve,” she said. “We are on a good path to achieve our objectives.”
Economists were slightly surprised by the three rate hike projection as markets have only been pricing in two hikes next year. The more hawkish-than-expected interest rate outlook pushed gold prices below key support at $1,150 an ounce. In electronic markets, February gold last traded at $1,145.80 an ounce, down 1.14% on the day.
Yellen downplayed the slightly more hawkish outlook as a “moderate adjustment” to the Fed Funds rate forecast.
Yellen also downplayed the impact potential fiscal policies proposed by President-elect Donald Trump will have on U.S. growth. While this was one factor behind the Fed’s new optimism, she said that it is too early to determine how these fiscal policies will unfold.
“I would simply summarize by saying that all the FOMC participants recognize that there is considerable uncertainty about how economic policies may change, and what effect they will have on the economy,” she said.
Yellen also said that the committee has time to wait to determine the impact of any potential new fiscal policies.