Gold holds near 1-week low as Powell sticks to hawkish narrative

(Reuters) - Gold steadied on Wednesday after shedding nearly 2% in the previous session on an elevated dollar, with demand for the non-yielding asset blunted by Federal Reserve Chair Jerome Powell signalling more rate hikes.

FILE PHOTO: An employee casts ingots of 99.99 percent pure gold during production at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. REUTERS/Alexander Manzyuk

Spot gold was nearly flat at $1,813.85 per ounce by 1:44 p.m. ET (1844 GMT) after hitting its lowest since Feb. 28 at $1,809.27. U.S. gold futures settled 0.1% lower at $1,818.60.

The dollar hovered near multi-month highs, making gold more expensive for overseas buyers. [USD/]

“Gold can rally a lot more on any dovish data than it can fall on any hawkish data that reaffirms Powell’s comments,” said Nicky Shiels, head of metals strategy at MKS PAMP SA, adding that “this ‘higher for longer’ mantra simply ups hard landing risks.”

Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes, but emphasized that debate was still underway and a decision would hinge on data still to be issued before the U.S. central bank’s policy meeting in two weeks.

Gold fell nearly 2% following Powell’s comments on Tuesday.

“Gold will trade defensively, likely straddling $1,800 into the March FOMC as Powell created uncertainty over both the size and end of rate hikes,” Shiels said, adding the Fed speeding up hikes put a short-term cap on pricing and sentiment.

Benchmark U.S. 10-year Treasury yields firmed on Wednesday, restricting interest in bullion. [US/]

Gold’s appeal tends to dim when rate hike expectations rise because higher rates increase the opportunity cost of holding non-yielding bullion.

“There are still several more event-driven risks the gold market needs to absorb - Powell today, jobs data on Friday, CPI on Tuesday,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Silver dipped 0.1% to 20.04 per ounce, platinum firmed 0.9% to $937.76 and palladium dropped 1.4% to $1,367.33.

Reporting by Bharat Govind Gautam in Bengaluru; Editing by Elaine Hardcastle, Jane Merriman and Maju Samuel