July 15 (Bloomberg) -- Gold futures fell to a three-week low in New York as a gain in the dollar reduced demand for the metal as an alternative investment.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, rose to the highest since June 25 as Federal Reserve Chair Janet Yellen told lawmakers the U.S. economy is on a solid trajectory, while emphasizing “significant slack” in labor markets. Yellen made the remarks today in her semi-annual testimony prepared for delivery to the Senate Banking Committee.
Gold fell the most since December yesterday as gains in equities and easing concerns on Portuguese banking reduced demand for haven assets. Yellen said in response to questions that she is seeing broad improvements as the job market continues to strengthen.
“The Fed comments are definitely causing a rally in the dollar and a selloff in gold,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in a telephone interview.
Gold futures for August delivery lost 0.7 percent to settle at $1,297.10 an ounce at 1:49 p.m. on the Comex in New York after touching $1,292.60, the lowest since June 19. Yesterday, the price dropped 2.3 percent.
Bullion has advanced 7.9 percent this year, rallying from the biggest annual drop in three decades in 2013, amid signs of slowing global economic growth and hostilities in the Middle East and Ukraine.
Yellen told lawmakers that “a high degree of monetary policy accommodation remains appropriate,” as “significant slack” remains in job markets. Interest rates are likely to stay low for a “considerable period” after bond purchases end, which could happen following the Fed’s October meeting, Yellen said.
The Fed has reduced its monthly bond buying to $35 billion from $85 billion in December.
Gold holdings in exchange-traded products rose 9.7 metric tons yesterday, the most since October 2012, to 1,736.9 tons, data compiled by Bloomberg show. Assets, which slumped 869.1 tons last year, are at the highest since April.
Silver futures for September delivery slid 0.1 percent to $20.889 an ounce on the Comex, after tumbling 2.5 percent yesterday, the most since April 15.
On the New York Mercantile Exchange, palladium futures for September delivery declined 0.4 percent $868.55 an ounce. Platinum futures for October delivery fell 0.5 percent to $1,485 an ounce.
--With assistance from Phoebe Sedgman in Melbourne, Nicholas Larkin in London and Glenys Sim in Singapore.