(Bloomberg) — Gold dropped as the dollar strengthened ahead of testimony by Federal Reserve Chair Jerome Powell, who may provide more clues as to the future path of monetary policy.
Inflation had picked up but should move back toward the Fed’s 2% target once supply imbalances resolve, Powell said in written remarks prepared for his Tuesday testimony before the House Select Subcommittee on the Coronavirus Crisis. Investors will tune in to the hearing for potential questions that shed more light on his view on the pace of the economic rebound.
Read more: Powell Renews Forecast for Inflation Subsiding Toward Fed’s Goal
Bullion tumbled the most in 15 months last week after the Fed brought forward projected rate hikes at its most recent policy meeting. The precious metal eked out gains so far this week as the dollar wavered, helped by investors in exchange-traded funds taking advantage of the dip in prices.
Gold investors will be monitoring Powell’s testimony for clues on when and how the Fed could begin to reduce some of its massive stimulus for the economy, said Avtar Sandu, a senior manager for commodities at Phillip Futures Pte. Gold’s “rebound would face headwinds and the gains would be slow unless prices can rise above $1,800 an ounce to convince traders that the rebound is not a dead cat bounce,” he said.
Spot gold declined 0.3% to $1,778.07 an ounce at 9:53 a.m. in London, after climbing 1.1% on Monday. Prices fell 6% last week, the most since March 2020. Silver also edged lower, while platinum and palladium were little changed. The Bloomberg Dollar Spot Index added 0.3% after dropping 0.4% on Monday.
“The current bounce seen in gold is more related to technical factors and the pullback seen in U.S. dollar strength,” said Kelvin Wong, an analyst at CMC Markets in Singapore. The technical indicators suggest that last week’s decline was overstretched, and that gold may see a snap-back rally toward the intermediate resistance levels of $1,800 and $1,852, he said.
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