Gold steadies after hitting 3-month low on Powell’s remarks

Gold prices pared losses on Wednesday, helped by a retreat in the dollar, although an uptick in bond yields after U.S. Federal Reserve Chair Jerome Powell’s congressional testimony kept bullion near a three-month low.

Spot gold was steady at $1,936.96 per ounce after dropping as much as 0.9% earlier. U.S. gold futures settled 0.1% lower at $1,944.9.

Further rate increases are “a pretty good guess” of where the central bank is heading if the economy continues in its current direction, Powell said in remarks on Capitol Hill, as the fight against inflation still “has a long way to go.”

There’s not one major element putting pressure on the gold market, but rather a combination of rising yields and technical selling pressure, said Jim Wyckoff, senior analyst at Kitco.

Benchmark 10-year Treasury yields rose after Powell’s testimony started, raising the opportunity cost of holding non-yielding bullion.

If Powell is even a bit more downbeat on future U.S. economic growth prospects or is ambivalent on future rate hikes, that may weaken the dollar index, in turn helping gold, Wyckoff added.

The dollar index eased 0.5% after Powell’s testimony began, making gold less expensive for holders of foreign currencies.

Traders are now pricing in a 79% chance of a 25-basis point Fed rate hike in July, according to the CME’s Fedwatch tool, with no rate cuts seen this year.

Gold prices have been getting dragged lower by large-scale selling activity observed across silver, platinum, and palladium, despite the dollar’s weakness, said Daniel Ghali, commodity strategist at TD Securities.