March 8 (Reuters) – Gold prices slipped to a one-week low on Wednesday after US Federal Reserve Chair Jerome Powell said interest rates might need to go higher than expected to curb inflationary pressures.
Spot gold eased 0.1% to USD 1,812.44 per ounce, as of 0634 GMT. US gold futures edged down 0.2% to USD 1,816.50.
The Fed will likely need to raise 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,on the first day of his semi-annual, two-day testimony before Congress.
In the aftermath of Powell’s remarks on Tuesday, gold prices had dropped as much as 1.9%, or by more than USD 30, to USD 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 USD 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 Fed slowed to a 25 basis-point rate increase at its last meeting, after bigger hikes last year to fight decades-high inflation, but a slew of data in recent weeks spurred concerns that the US central bank would persist with monetary policy tightening.
are now pricing in a 50 basis-point 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.
Meanwhile, Australia’sreported gold product sales in February fell to their lowest in more than two years, while silver sales rose about 20% on the month.
Spot silver was down 0.1% at USD 20.03 per ounce, platinum added 0.8% at USD 936.72 and palladium rose 0.3% to USD 1,391.40.
(Reporting by Kavya Guduru in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)
This article originally appeared on reuters.com