Gold prices slipped to a one-week low on Wednesday after U.S. Federal Reserve Chair Jerome Powell said interest rates might need to go higher than previously expected to curb inflationary pressures.
FUNDAMENTALS
Spot gold was down 0.1% at $1,811.83 per ounce, as of 0128 GMT, after falling more than 1% on Tuesday. U.S. gold futures fell 0.2% to $1,816.30.
The dollar index hit a three-month month high, making bullion less affordable for buyers holding other currencies.
The Fed will likely need to raise interest 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, Powell told U.S. lawmakers on Tuesday.
Although gold is considered a hedge against inflation, interest rate hikes to control rising prices tend to decrease the appetite for zero-yield bullion.
Traders of futures tied to the Fed’s policy rate have priced in a 50 basis-point rate hike at the U.S. central bank’s March 21-22 policy meeting following Powell’s remarks.
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