ALL THAT GLITTERS IS GOLD

Gold: Gold prices stabilized below a 7-1/2-month high on Wednesday after U.S. Federal Reserve Chair Janet Yellen said that only "gradual" adjustments to monetary policy were likely and stressed that global headwinds could hurt U.S. growth. In her first testimony to Congress since the December rate hike, Yellen said that tightening financial conditions and uncertainty over China pose risks to the U.S. recovery, but chances are slim the Fed would need to reverse the rate tightening cycle. The gold price rally has hurt demand from physical buyers of the metal, traders said, while top consumer China was closed for the Lunar New Year holiday. Prices in India slipped to a record discount as dealers struggled to draw buyers by offering a record discount of up to $25 an ounce to the London benchmark price.

Outlook: We expect gold prices to trade positive on the back of Fed chair Yellen’s dovish statements

Silver: Silver was down 0.1 percent at $15.24 an ounce. The Federal Reserve is unlikely to reverse its plan to raise interest rates further this year,

but tighter credit markets, volatile financial markets, and uncertainty over Chinese economic growth have raised risks to the U.S. economy, Fed Chair Janet Yellen told U.S. lawmakers on Wednesday. "I don't expect the (Federal Open Market Committee) is going to be soon in the situation where it is necessary to cut rates," Yellen said. "There is always a risk of a recession...and global financial developments could produce a slowing in the economy," she added. Yellen said she expected continued U.S. economic growth would allow the Fed to pursue its plan of "gradual" rate hikes, but her comments kept the central bank's options open.

Outlook: We expect silver prices to trade positive on the back of Fed chair Yellen’s dovish statements.