Futures & Commodities

Gold hastens retreat after Powell comments, near certain March rate hike

Key Points
  • Palladium climbs 8% to highest since Sept. 8
  • SPDR Gold holdings highest since August

In this article

Gold and Silver bullion is offered for sale at the Chicago Coin Company May 11, 2006 in Chicago, Illinois.
Scott Olson | Getty Images

Gold extended declines on Wednesday as the dollar and Treasury yields bounced after U.S. Federal Reserve Chairman Jerome Powell signaled a shift away from pandemic-era economic support measures, with the central bank on course for a March interest rate hike.

Officials are "of a mind" to raise rates at a March 15-16 meeting, Powell said at a news conference following the release of the Fed's latest policy statement, triggering a jump in yields and the dollar, dimming appetite for non-yielding gold. Spot gold was down 1.6% at $1,818.66 per ounce as of 15:32 ET (2032 GMT), after sliding as much as 1.8% to its lowest in a week at $1,815.06.

U.S. gold futures settled down 1.2% at $1,829.70.

Silver fell 1% to $23.59.

"Powell's hawkish comments practically guaranteeing a March rate hike, emphasizing the economy's strength and noting that the Fed's balance sheet was overlarge and needs to be wound down, has triggered a bond selloff and higher USD which has pressured gold to recent lows," said New York-based independent precious metals trader Tai Wong.

Interest rate hikes raise the opportunity cost of holding non-yielding gold.

"While physical and ETF demand has remained strong, Powell's hawkish comments seem likely to have put a cap on gold around $1,850 in the short term."

Palladium, meanwhile, was up 6.1% at $2,334.89 an ounce, after hitting its highest since Sept. 8 at $2,382.82, while platinum rose 0.8% to $1,033.72.

Analysts attributed the gains in the metals used in emissions-reducing autocatalysts for vehicles to likely supply constraints that could be triggered by a standoff between Western powers and Russia over concerns that Moscow may invade Ukraine.

Given Russia is a key producer of both metals, supply disruptions could tighten the market, Standard Chartered analyst Suki Cooper said.