(Kitco News) - Gold prices are selling off and hit a two-week low in early USA trading Wednesday, as some upbeat US economic data has increased the odds of a USA interest rate hike coming soon. USA gold futures GCcv1 settled up 0.7 percent at $1,241.60.
U.S. dollar surged strongly to the highest level over last three weeks after Yellen's optimistic comments related to the interest rate hike, and as history has it, a stronger dollar makes oil prices more costly for consumers using various currencies.
In early Tuesday trading, gold bounced back to 1,227 per ounce, as prices rose ahead of Federal Reserve Chair Janet Yellen's testimony in front of Congress, where she held the line on "gradual" interest rate hikes going forward.
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"Perhaps the market is now underestimating the prospects of an interest rate hike by the US Federal Reserve in March, given the strong economic data".
The gold and silver markets sold off a bit following Yellen's comments Wednesday, which were deemed a bit hawkish on USA monetary policy. Yellen's comments boosted appetite for assets perceived as higher risk, like equities, as well as the dollar. The greenback bulls have upside momentum as prices have been trending higher for three weeks.
Crude Oil trading at $ 52.88 is unlikely to trade below $50 per barrel.
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With equities unable to make further headway, gold maintained a firm tone and approached the $1,240 resistance area ahead of the U.S. open, close to last week's 3-month highs.
In a note to clients, analysts at Vienna-based JBC Energy said monthly price ranges for Brent have been very narrow, with no monthly price range of more than $5 per barrel since November. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,200.00. First resistance is seen at $1,225.00 and then at this week's high of $1,236.00.
Silver XAG= was up 0.5 percent at $18.07, after reaching a three-month high at 18.13. Next support is seen at Tuesday's low of $17.73 and then at $17.545.
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