Gold prices slipped to a one-week low today after US Federal Reserve Chair Jerome Powell said interest rates might need to go higher than previously expected to curb inflationary pressures.
Spot gold was down 0.2% at $1,810.84 per ounce, as of 0409 GMT. U.S. gold futures fell 0.4% to $1,813.60.
The US Fed will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Jerome Powell said on the first day of his semi-annual, two-day testimony before Congress.
In the aftermath of Jerome Powell’s remarks on Tuesday, gold prices had dropped as much as 1.9%, or by more than $30, to $1,812.55.
“Nobody wants to buy gold today following the hawkish remarks from Powell … there’s also very little gold-selling, with prices pushing slightly lower but without conviction – gold almost looks startled today,” said Matt Simpson, a senior market analyst at City Index.
“A break below $1,800 is on the cards for gold,” he added.
Higher interest rates usually dull gold’s appeal because they increase the opportunity cost of holding the asset which bears no interest.
The U.S. central bank had slowed to a 25-basis-point interest rate hike in its last meeting, after larger rate hikes last year to fight decades-high inflation, but a slew of data in recent weeks spurred concerns that the Fed would persist with monetary policy tightening.
Traders of futures tied to the Fed’s policy rate have priced in a 50 basis-point rate hike at the Fed’s March 21-22 policy meeting.
The dollar index hit a three-month high, making bullion less affordable for buyers holding other currencies. [USD/]
Investors are awaiting the U.S. jobs report for February due on Friday.
Spot silver lost 0.5% to $19.95 per ounce, platinum firmed 0.2% to $931.33 and palladium fell 0.2% to $1,384.37.
(Except for the headline, this story has not been edited by String Reveals staff and is published from a syndicated feed.)
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