Gold flat as markets await Powell’s testimony for rate cues

Reuters – Gold prices moved in a tight range on Wednesday after two-straight sessions of declines, as investors refrained from making large bets ahead of US Federal Reserve Chairman Jerome Powell’s congressional testimony.

Spot gold held its ground at USD 1,936.03 per ounce by 0504 GMT. US gold futures were little changed at USD 1,947.10.

“The expected sustained (Fed) tightening bias is weighing on gold. In this light, Chairman Powell’s testimony could have a major short-term impact on the market,” said Clifford Bennett, chief economist at ACY Securities.

Powell delivers a semi-annual monetary policy testimony to the US House Financial Affairs Committee at 1400 GMT and market participants will be looking out for the central bank’s thinking on need for further interest rate increases amid hawkish remarks from policymakers.

Two Federal Reserve policymakers and an economist nominated to join them on the Fed’s Washington-based board on Tuesday said their focus is on bringing down too-high inflation so that the US economy can get back to sustainable growth.

Traders are now pricing in an about 77% chance of a 25 basis point Fed rate hike in July, according to the CME Fedwatch tool. Interest-rate hikes raise the opportunity cost of holding non-yielding bullion.

“For the moment gold is under the great interest rate threat hammer, but the very real on-going strong jewellery and manufacturing demand should eventually win the day,” Bennett added.

The US dollar, meanwhile, was firm in Asia trade following surprisingly strong US housing data, keeping bullion under pressure.

“Gold is breaking below the 100-day moving average, which adds further pressure to prices as technical traders exit or short gold and look at USD 1,842 as the potential downside to current prices,” Michael Langford, chief investment officer at Scorpion Minerals said.

Among other precious metals, spot silver fell 0.4% to USD 23.0973 per ounce, platinum shed 0.6% to $957.16, and palladium lost 0.3% to USD 1,375.37.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu and Nivedita Bhattacharjee)