Gold drops to more than 3-month low as traders await Powell speech

Gold prices slipped to a more than three-month low on Wednesday after upbeat US economic data cemented expectations of more rate hikes this year as investors positioned for a speech by Federal Reserve Chair Jerome Powell’s later on Wednesday.

Spot gold fell 0.3 per cent to $1,908.33 per ounce by 0946 GMT (1.46pm UAE time), hitting its lowest since mid-March earlier in the session. US gold futures shed 0.3 per cent to $1,917.40.

“Good US economic data remains a headwind for the yellow metal, as it likely keeps Fed officials reiterating a hawkish tone,” UBS analyst Giovanni Staunovo said.

US consumer confidence increased in June to the highest level in nearly 1-1/2 years amid renewed labour market optimism, while business spending appeared to hold up in May, indicating the economy remained on a solid footing despite fears of a recession.

Investors’ focus has shifted to Powell’s speech at an afternoon policy panel before a European Central Bank Forum in Portugal. The US central bank signalled this month that borrowing costs may still need to rise by as much as half a percentage point by the end of this year.

“(But) we still expect at some point the aggressive monetary policy tightening to weaken US economic data and result in a change of tone by the Fed,” Staunovo added.

High interest rates discourage traders from investing in non-yielding gold.

“We’ve seen increasing signs that the US may evade an outright recession ... Our forecasts see gold falling closer to $1,850 levels this year based on this assumption and that interest rates might stay higher for slightly longer than the market was expecting,” Harshal Barot, senior consultant at Metals Focus, said.

The dollar index inched up 0.1 per cent, making gold less attractive for overseas buyers.

Among other metals, spot silver fell 0.6 per cent to $22.74 per ounce, platinum shed 0.8 per cent to $917.30, and palladium dropped 2.5 per cent to $1,263.98.