Investing.com - Gold prices fell sharply during European morning trade on Thursday, dropping below the $1,200-level after Federal Reserve Chair Janet Yellen said the U.S. economy is strong enough to warrant higher interest rates.
Gold for February delivery on the Comex division of the New York Mercantile Exchange slumped $12.35, or around 1%, to $1,199.75 a troy ounce by 3:35AM ET (08:35GMT), after sliding 80 cents, or less than 0.1%, a day earlier.
With the U.S. economy close to full employment and inflation headed toward the Federal Reserve's 2% goal, it "makes sense" for the U.S. central bank to gradually lift interest rates, Fed Chair Janet Yellen said on Wednesday.
The Fed chief said that she and other Fed policymakers expected the central bank to lift its key benchmark short-term rate "a few times a year" through 2019.
That pace could change depending on how the outlook for the economy develops, Yellen cautioned.
Yellen speaks again Thursday evening at 8:00PM ET (01:00GMT Friday) on the economic outlook and monetary policy at Stanford University.
The dollar index was at 101.20 early Thursday, pulling away from a near two-month low of 100.23 touched earlier this week.
The Fed indicated last month that at least three rate increases were in the offing for 2017, according to a forecast of interest rates from members of the central bank, known as the dot-plot.
However, traders remained unconvinced. Instead, markets are pricing in just two rate hikes during the course of this year, according to Investing.com's Fed Rate Monitor Tool.
Meanwhile, global financial markets will continue to focus on U.S. President-elect Donald Trump as he takes the Oath of Office and offers his inaugural address on Friday. Trump will be speaking at a pre-inauguration event later on Thursday.
Investors will welcome any detail he may give on his promises of tax reform, infrastructure spending and deregulation, as well as insight regarding policies on China and the domestic economy.
Trump has been credited with being a major catalyst behind the market's impressive rally since election day, although he has yet to outline his economic policies in detail.
Also on the Comex, silver futures for March delivery sank 33.0 cents, or about 1.9%, at $16.94 a troy ounce during morning hours in London.
Meanwhile, platinum fell 0.9% to $963.25, while palladium dipped 0.1% to $750.48 an ounce.
Elsewhere in metals trading, copper futures eased up 0.4 cents, or about 0.1%, to $2.620 a pound.