People at Malabar Gold & Diamonds in Lulu Hypermarket, Al Qusais. Gold slipped to its lowest since July last year at $1,220.41 an ounce earlier in the session. Image Credit: Ahmed Ramzan/Gulf News Archives

Bengaluru: Gold extended falls to a one-year low on Thursday as the US dollar firmed after Federal Reserve Chairman Jerome Powell asserted the need for further interest rate hikes amid a strong economy.

Spot gold was down 0.2 per cent at $1,223.56 an ounce at 0703 GMT. The yellow metal slipped to its lowest since July last year at $1,220.41 an ounce earlier in the session.

US gold futures for August delivery were 0.4 per cent lower at $1,223.20 an ounce.

“Gold market is just following the US dollar, the dollar is strong so it’s pushing the market down,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

“The economy is still good and interest rate still up, so that’s good for the US dollar and negative for gold for the time being.”

The dollar held firm against its peers, supported by bullish comments from Powell, which affirmed expectations for at least two more interest rate hikes this year.

“Rallies continue to be well sold and it is difficult to see a break toward $1,236 — $1,240 (in gold) with the current dollar strength,” MKS PAMP Group said in a note.

Played down risks

Fed’s Powell in a closely watched two-day congressional testimony, said he believed the United States was on course for years more of steady growth, and carefully played down the risks to the US economy of an escalating trade conflict.

However, manufacturers in every one of the Federal Reserve’s 12 districts worried about the impact of tariffs, a Federal Reserve report said on Wednesday, even as the US economy continued to expand at a moderate to modest pace.

US. President Donald Trump said on Wednesday the United States may hammer out a trade deal with Mexico, and then do a separate one with Canada later, sowing fresh doubts about the future of the North American Free Trade Agreement (Nafta).

Spot gold has found a support zone of $1,220-$1,226 per ounce. It may hover above this zone for one more day or bounce towards a resistance at $1,237, Reuters technical analyst Wang Tao said.

Among other precious metals, silver was down 0.8 per cent at $15.41 an ounce, after earlier hitting its lowest since last July at $15.33 an ounce.

Platinum was 0.4 per cent lower at $810.30 an ounce.

In the previous session, it hit an over two-week low of $798.14.

Palladium was down 0.1 per cent at $905.47 per ounce.

It fell to its weakest since April 9 at $902.97 on Wednesday.