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Gold Prices Undermined As Fed's Yellen Calls For Higher Rates

Gold prices are making headlines again. Recently the price rebounded above $1,000, just before Donald Trump became the President of United States. The price of spot gold went low as $1,198 per ounce, which was about 0.7 percent from the value on Tuesday. Because of this reason, the economist Yellen has called for higher rates.

Yellen spoke two days before the inauguration ceremony of Donald Trump and he mentioned that United States has come faced a nasty surprise as the country has waited for a long period of time for the increase of rates. This was published through the Financial Times and became viral in every corner of the world. In addition, Yellen has stated that Fed is looking forward to increase the rates for three separate times within this year. It would continue in 2018 as well and we can expect the rates to be increased several times before 2019.

The gradual increase of interest rates would not be good news for gold. That's because gold would not have the ability to offer any income to people in the future. When gold doesn't offer an income, it becomes less attractive among people. As a result, they would start looking for assets that have the ability to generate some sort of a yield. The highest value of gold, which was $1,218, was hit on Thursday and it showed the early signs of breaking the value. After few hours, the price reached $1,201 per ounce. On the following day, the gold price was slightly increased up to $1,204 per ounce. It seems like there won't be any significant increase in gold prices within the near future.

Even though the gold prices have negatively been impacted throughout the past, we can expect it to be consolidated somewhere around $1,200 for a little time period. This fact was verified from the words of Mark To, who was a member of the Wing Fung Financial Group. The new policies introduced by Donald Trump would also create an impact on this.

People who are engaged with buying and selling gold are interested in making the gold prices go up. As a result, they have taken necessary measures to make the prices go up as well. Setting up of selling markers at higher levels can be considered as a good example to prove this fact. This can create a tremendous impact on the long term price of gold. It can also be considered as an indication where gold is oversold or overbought. When the price of gold closes below or above the levels that are set by investors, new information is suggested and it can change perception. This can give life to a new price range at the end of the day.

Gold can be considered as a safe heaven asset that can be found in the global investment markets. As a result, the investors are looking forward to make prices go up and create favorable conditions for them. They expect the policies of Donald Trump to be favorable for gold prices as well. Once Trump has stated that the United States dollar is too strong and it indicates that the price of gold would be shortived. However, the experts have issued warnings about the increase of interest rates within the country this year, which can set the USD to a historically high level. Therefore, we cannot expect a stable value for gold prices to remain in long term.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.