Gold dips after Powell reiterates vow to tame inflation

Gold prices slipped on Thursday after comments from Federal Reserve Chair Jerome Powell cemented expectations around a 75-basis-point rate hike at its upcoming policy meeting.

The Fed is “strongly committed” to controlling inflation but there remains hope it can be done without the “very high social costs” involved in prior inflation fights, Powell said.

Spot gold fell 0.64% to $1,706.67 per ounce after hitting a more than one-week high earlier in the session.

U.S. gold futures also settled down 0.4% at $1,720.20.

“Powell’s comments are entirely consistent with the Jackson Hole Conference, he’s not pushing back against market pricing for a 75 basis point increase coming at the September meeting,” said Daniel Ghali, commodity strategist at TD Securities.

“There’s a lot of buying support because of this technical range around $1,700. But, we’re expecting this level to break in the near term.”

Fed fund futures are now pricing in a 85% chance of a 75-basis-point rate hike by the Fed at its Sept. 20-21 policy meeting.

Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Data showed the number of Americans filing new claims for unemployment benefits fell last week to a three-month low, underscoring the robustness of the labor market.

In the wake of Powell’s comments, the dollar earlier rose to hover near its recent peak, making gold more expensive for other currency holders.

Earlier in the day, the European Central Bank raised its key interest rate by an unprecedented 75 basis points and signaled further hikes, prioritizing the fight against inflation.

Spot silver was 0.16% lower at $18.48 per ounce, platinum rose 1.5% to $879.50 and palladium was up 4.7% at $2,139.41.