Gold prices have steadied after the previous session’s more than one per cent fall following comments by the Federal Reserve’s new chairman that fuelled views the US central bank would raise rates four times this year rather than three.
The US dollar hit a five-week high versus a basket of currencies, lifted by Fed Chairman Jerome Powell’s upbeat assessment of the US economy on Tuesday.
A strong dollar makes dollar-priced gold costlier for investors using other currencies.
Spot gold was flat at $US1,317.94 per ounce by 1.34 pm Wednesday EST (0534 Thursday AEDT) and was poised to close February down 2 per cent. On Tuesday, it hit the lowest since February 9 at $US1,313.26.
US gold futures settled down 70 cents or 0.1 per cent, at $US1,317.90 per ounce.
‘Even though the dollar is stronger and Treasury yields are higher, the gold market oversold itself yesterday, and now we’re recovering a bit,’ said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
Powell noted in his speech that recent data had strengthened his confidence that inflation will rise. .
Inflation generally supports gold, which is considered a safe store of value when price pressures rise. But raising interest rates to fight inflation makes the non-yielding metal less attractive.
World stocks tumbled as dismal Chinese and Japanese manufacturing and industrial output data added to the bearish equities sentiment sparked by the US interest rate hike views after Powell’s comments.
Elevated US debt levels and volatility in stocks could boost gold prices above $US1,400 longer-term, according to a Reuters survey of analysts.
Spot gold is expected to break support at $US1,317 per ounce and fall to the next support level at $US1,303, as suggested by its wave pattern and a projection analysis, Reuters technical analyst Wang Tao said.
‘People are looking to buy gold on dips, so I think it will be supported down at $US1,300,’ a Hong Kong-based trader said.
Silver lost 0.2 per cent to $US16.39 an ounce, close to a 5.2 per cent monthly decline. Palladium rose 0.8 per cent at $US1,043.70, but headed for a 2 per cent monthly drop. Platinum was flat $US983.10 per ounce, after dropping to a two-week low of $US972.50, declining 2 per cent for the month.