Investing.com -- Gold futures were relatively flat on Wednesday, remaining near eight-month highs, as Federal Reserve chair Janet Yellen reiterated that current conditions in the U.S. economy are likely to warrant gradual interest rate hikes by the U.S. central bank in the near-term future.
On the Comex division of the New York Mercantile Exchange, gold for April delivery wavered between $1,181.90 and $1,194.80 an ounce, before closing at $1,192.30, down 6.20 or 0.52% on the session. Gold remained near intraday highs from Monday's session when it surged above $1,200 an ounce for the first time since early-June. Despite the minor losses, gold still remains up by nearly 7% since the start of the month and up by more than $100 an ounce since the start of the year.
Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,222.60, the high from May 18.
On Wednesday morning, Yellen testified before the U.S. House of Representatives Financial Services Committee for the first time since the Federal Open Market Committee (FOMC) ended a seven-year zero interest policy late last year. At a historic meeting in mid-December, the FOMC raised short-term interest rates for the first time in nearly a decade by lifting the target range on its benchmark Federal Funds Rate by 25 basis points to 0.25 and 0.50%. The FOMC followed by leaving the target rate unchanged at a meeting in late-January.
In her testimony, Yellen emphasized that the Fed's monetary policy cycle is not on a preset course, as further interest rate decisions will continue to depend on incoming economic data over the next several months. Yellen also noted that the neutral nominal federal funds rate, or the rate which is neither expansionary or contractionary if the economy is operating at its full potential, is "currently low by historical standards." Yellen cited a range of economic headwinds for restraining the rate including: the appreciation of the dollar, limited credit availability for borrowers and weak growth abroad.
Moving forward, Yellen stressed that diminishing slack in the labor market and a bottoming of oil price declines could help move inflation back toward the Fed's long-term targeted goal of 2%. Core PCE Inflation, the Fed's preferred gauge of inflation, currently hovers at 1.4%, considerably below the FOMC's objective.
"In particular, stronger growth or a more rapid increase in inflation than the Committee currently anticipates would suggest that the neutral federal funds rate was rising more quickly than expected, making it appropriate to raise the federal funds rate more quickly as well," Yellen testified.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose by more than 0.35% to an intraday high of 96.77. Before Yellen's testimony, the index was up modestly on the day by 0.15%.
The index tumbled by more than 1% on Tuesday to an intraday low of 95.68, its lowest level since late-October. Since the FOMC released its latest monetary policy statement on Jan. 27, the dollar has fallen by approximately 2.85%.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for March delivery fell 0.209 or 1.35% to 15.235 an ounce.
Copper for March delivery lost 0.013 or 0.65% to 2.027 a pound.