Gold slips on dollar gains as Powell doubles down on policy tightening

(Reuters) - Gold gave up initial gains and edged lower on Thursday as the dollar regained momentum after U.S. Federal Reserve Chairman Jerome Powell doubled down on the central bank’s policy tightening aimed at taming inflation.

FILE PHOTO: An ingot of 99.99 percent pure gold is cast at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk

Spot gold fell 0.8% to $1,822.64 per ounce by 2:28 p.m.m ET (1828 GMT). U.S. gold futures settled down 0.5% to $1,829.8.

After Powell said the Fed’s commitment to curbing inflation was “unconditional”, the dollar index resumed its uptick, dimming gold’s appeal. A stronger dollar makes gold expensive for overseas buyers.

While gold is considered a hedge against inflation and economic uncertainties, rising interest rates tend to lift bond yields and thus increase the opportunity cost of holding zero-yield bullion.

Gold is being pressured by the aggressive nature of the Fed’s tightening strategy, with the dollar gains also an impediment, said Jim Wyckoff, senior analyst at Kitco Metals.

The gold and silver markets were also being weighed down by expectations that the overall economic slowdown could also hamper demand for metals, although “gold’s safe haven status is limiting the downside”, Wycoff added.

Meanwhile, U.S. yields fell to their lowest in almost two weeks, while fears about an economic slowdown continued to mount as Powell indicated that the Fed’s fight against inflation may come at the cost of rising unemployment.[US/]

Investors also took stock of data showing a dip in U.S. weekly jobless claims last week as labor market conditions remained tight. Meanwhile, U.S. business activity slowed considerably in June, a survey showed.

Bank of China International analyst Xiao Fu said while gold will attract buyers due to recession risks, rising rates could significantly impact asset classes, including gold.

Spot silver fell 2.2% to $20.92 per ounce, platinum was down 2.4% at $904.60 and palladium fell 1% to $1,844.81.

Reporting by Ashitha Shivaprasad and Arundhati Sarkar in Bengaluru; editing by David Evans, Shinjini Ganguli and Vinay Dwivedi