Futures & Commodities

Pre-Powell jitters put gold on the backfoot

A gold bar is wrapped in a financial newspaper.
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Gold retreated on Tuesday as traders awaited testimony from U.S. Federal Reserve chair Jerome Powell for any more clarity on monetary policy after the central bank struck a hawkish tone last week.

Spot gold fell 0.3% to $1,777.91 per ounce by 1:35 pm EDT (1735 GMT), while U.S. gold futures for August settled down 0.3% at 1,777.4.

Market participants are awaiting congressional testimony from Powell, from 1800 GMT, after the Fed signaled interest rates could rise into 2023 and it would begin taper asset purchases, which drove a 6% slide in gold last week.

"They (gold traders) are specifically looking at the questions and answers (from Powell's testimony) to see if there's anything he says, something out of the ordinary from the prepared text," said Kitco Metals senior analyst Jim Wyckoff.

In prepared testimony released late on Monday, Powell said the U.S. economy continues to show "sustained improvement" and predicated a decline in inflation from current elevated levels.

The dollar index edged 0.1% lower, reversing early gains on Tuesday, but the greenback's retreat provided little respite for gold, even though it makes gold cheaper for holders of other currencies.

For the most part, the gold trade is struggling because there's no clarity on whether inflation will persist, while safe-haven interest in bullion has also likely dipped with rising equities, Edward Moya, senior market analyst at OANDA, said.

Auto-catalyst metal palladium eased 1.1% to $2,558.12 and platinum gained 2.2% to $1,076.75.

Citi Research expects palladium prices to rebound to $3,000 as market balances tighten over the next three months.

"The palladium physical market has not shown tightness yet and the recent dollar strength also weighs for the short-term on prices," the bank said in a note.

Elsewhere, silver fell 0.5% to $25.80 per ounce.