Investing.com -- Gold futures inched up ahead of comments from Janet Yellen on the state of the U.S. economy, as a moderate reading of the Consumer Price Index unleashed further debate on the timing of an interest rate hike from the Federal Reserve.
On the Comex division of the New York Mercantile Exchange, gold for June delivery gained 1.40 or 0.12% to 1,205.05 an ounce. For the week, gold closed down roughly 1.25% after reaching a three-month high on Monday.
Gold continued on a volatile path on Friday, after ticking down 0.38% one session earlier. Last Friday, gold futures closed up by 0.01% capping a four-day winning streak. Since then, the precious metal has not closed in the same direction on two consecutive days underscoring investors' ambiguity toward the long-term prospects of the global economy.
A relatively benign CPI report for the month of April likely added to their uncertainty. On its face, consumer prices appeared to be soft last month as the headline CPI only gained 0.1% from March, slightly below economists' forecasts. Over the last 12 months, the CPI-U all items index is down by 0.2%.
A reading of the less volatile Core CPI Index, which excludes food and energy prices, is ostensibly less deflationary. The Core CPI rose 0.3% for the month, its highest gain since January, 2013, and 1.8% on a year-over-year basis. The deflationary pressures could be attributed almost entirely to a sharp drop in energy prices. While crude futures are down more than 40% over the last 52-weeks, they rose by nearly 25% last month.
In April, the Federal Open Market Committee (FOMC) said medium-term forecasts for inflation, which it generally defines as the next two years, projected to "move closer but remained" below its targeted goal of 2%. In March, the Personal Consumption Expenditure index, the Fed's preferred gauge of inflation, was up by only 0.3% over the last 12 months.
Gold prices plunged to 1,205 on Friday morning 30 minutes after the release of the CPI from 1,212.40 before the U.S. Bureau of Labor Statistics issued the monthly report.
Yellen is expected to address the U.S. economic outlook during an address at the Greater Providence Chamber of Commerce on Friday afternoon. The Fed chair could be looking to test the markets before the FOMC decides on the timing of a rate hike.
Yellen appears concerned that interest rates could spike after initial lift-off, citing the possibility of an increased role of high frequency trading, decreases in inventories held by broker-dealers and the potential for higher assets in bond funds in the April minutes of the FOMC meeting.
She also appears worried that a premature rate hike could cause bond yields to soar in a repeat of a "taper tantrum" in 2013 when her predecessor Ben Bernanke announced his intentions to curtail a comprehensive bond-buying program intended to stimulate the economy. Following Bernanke's comments, yields on the U.S. 10-year surged, at one point reaching a 29-month high. The incident could prompt Yellen to remain cautious on the timing of lift-off and subsequent gradual rate increases.
Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in periods of rising rates. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose 0.68% to 96.11 following the release of the CPI.
Silver for July delivery rose 0.05% to 17.123 an ounce.
Copper for July delivery fell 1.43% to 2.808 a pound.