Gold prices are volatile this morning, as safe haven demand duels with this morning's Congressional testimony of Federal Reserve head Janet Yellen.
Spot gold was up as much as $10 an ounce in reaction to last night's sudden resignation of President Trump's National Security Advisor over his contacts with Russian officials before and after Trump's victory in the 2016 Presidential election.
National Security Advisor Mike Flynn suddenly resigned last night, as more evidence of his questionable contacts with Russian officials came to light. Intelligence agencies uncovered more evidence that Flynn's initial statements regarding his conversations with the Russian ambassador to the US regarding the lifting of sanctions were untruthful, which increased concerns of undue Russian influence in the Trump White House.
Fed Chairwoman Janet Yellen remarked to the Senate Banking Committee this morning that the central bank was on track to gradually raise interest rates. She also noted that the Fed was paying more attention to the possibility of falling behind curve on inflation, which would compel faster and larger rate hikes. Markets took this to mean that the odds on the next rate hike were sooner than later, pulling the dollar out of negative territory, and sending Treasury yields climbing.
While bond markets still point towards June for the next rate hike by the Fed, odds for a May rate hike are growing.
In other precious metals news, silver prices briefly broke above the $18 mark before Yellen's statements, while platinum and palladium also gave up moderate gains. Palladium futures are the best-performing commodity this morning, up more than $14 year-to-date.
Oil prices are seeing strength due to data that shows most of OPEC adhering to agreed-upon production cuts, but rapidly expanding fracking operations in US shale fields are limiting the speed of drawdowns in global crude stockpiles.
These higher oil prices have been tapped as a major factor in accelerating inflation in the UK, and growing wholesale price pressures in the US. Producer prices in the US for January rose 0.6%, the largest monthly jump in over four years. This compared to a 0.2% rise in December, and economists' projections of a gain of 0.3%, half of the actual print. Year-to-year, wholesale prices rose 1.6%. The jump in the PPI was credited to higher prices for raw materials, especially oil.
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