(Kitco News) – The gold market is trying to recover from session lows as it was dragged down by hawkish comments from Secretary-Treasurer Janet Yellen.
Speaking in a webinar hosted by The Atlantic, Yellen warned that interest rates may have to rise to keep the US economy from overheating.
“Interest rates may need to increase somewhat to ensure our economy does not overheat, even though the additional spending is relatively small relative to the size of the economy,” she said. in the presentation, grabbing the gold and silver. price by surprise.
Gold prices last traded at $ 1,775.1 an ounce, down nearly 1% on the day. Meanwhile, silver prices are giving back more gains after Monday’s rebound. July silver last traded at $ 26.31 an ounce, down more than 2% on the day.
But it wasn’t just the markets that were taken by surprise as some analysts noted Yellen’s comments on interest rates were inappropriate.
“Yellen is no longer chairman of the Fed and Powell will not like this speech. It’s amazing that she is taking this route, ”said Adam Button, chief currency strategist at Forexlive.com. “She seems to be talking about market-determined rates, but that’s a bizarre comment from someone who absolutely should know how to stay in her lane.
Axel Merk, chairman and chief investment officer at Merk Investments also noted that it was inappropriate for Yellen to talk about monetary policy.
Yellen can of course be right. However, monetary policy becomes less effective when the message is torpedoed, especially when it comes from a credible source.
– Axel Merk (@AxelMerk) May 4, 2021
Yellen also referred to President Joe Biden’s spending proposals, saying he was addressing long-standing problems in the economy.
Yellen’s comments on interest rates come just 48 hours after minimizing mounting inflationary pressure.
While rising inflationary pressures could mean the Federal Reserve may have to hike interest rates sooner than expected, many market analysts see a low probability.
Many analysts don’t believe the economy can grant higher interest rates, as the government seeks to spend trillions of dollars on infrastructure, thereby wiping out the already inflated deficit.
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