Gold edging higher despite ETF's outflow after Yellen's dovish testimony

Yesterday, Fed Chair Yellen's testimony before the banking committee of the US Senate would take place this afternoon, though we do not expect this to yield anything new about the US monetary policy as she referred the further interest rate decisions will continue to depend on incoming economic data over the next several months.  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.

Overnight, 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.

Recent surge in yellow metal above the $1,200 per troy ounce mark at the beginning of the week, gold still appears to be  robust and is holding its own close to this psychologically important level. In the current market environment, characterized as it is by high levels of uncertainty and volatility, gold clearly remains in demand as a safe haven.

This morning sees gold priced a good €20 per troy ounce lower. Yesterday the series of ETF inflows came to an end: after 16 consecutive trading days of inflows - during which time holdings in the gold ETFs tracked by Bloomberg increased by 78.6 tons - yesterday saw an outflow of 1.5 tons from the SPDR Gold Trust.

The World Gold Council will be publishing the gold demand trends for the fourth quarter - and thus also for 2015 as a whole - tomorrow morning. Silver has been pulled up by gold in recent weeks and has achieved a three-month high of $15.5 per troy ounce.

Having said that, silver did not make disproportionate gains as it normally does, as can be seen from the gold/silver ratio which is close to a multi-year high at 78. Unlike gold, silver also saw no ETF inflows this year, but actually registered outflows.