Gold holds steady as all eyes on Powell’s interest rate speech

Bengaluru — Gold was subdued on Friday, as investors adopted a cautious stance ahead of US Federal Reserve chair Jerome Powell’s speech at a key central bankers’ conference, which will be watched for guidance on future interest rate hikes.  

Spot gold inched 0.2% lower to $1,755.00/oz by 3.11am GMT. US gold futures dropped 0.2% to $1,768.10. However, greenback-priced bullion is set for a weekly rise of about 0.4%, helped by intermittent dips in an otherwise resilient dollar.

The dollar index hovered near one-month highs, while benchmark US 10-year Treasury yields firmed. Gold has retreated because the dollar has started picking up some steam and there is also some thought that the Fed will remain in inflation fighting mode, which will be perceived as hawkish, said Stephen Innes, managing partner at SPI Asset Management.

Powell’s speech is due at 2pm GMT on Friday at the Jackson Hole symposium in Wyoming in the US. His address will be watched closely by market participants for any clues on how aggressively the US central bank will continue tightening monetary policy, and for indications on a potential change of strategy in case of an economic slowdown.

While gold is considered a safe investment during times of economic volatility, interest rate hikes increase the opportunity cost of holding non-yielding bullion.

“I think Powell’s going to hint that bringing down inflation will probably require a trade off, in other words we’ll have to take an economic hit … This is going to be good for gold,” Innes added.

Fed officials on Thursday maintained that they will drive rates up and keep them there until inflation has been squeezed.

Spot silver slipped 0.3% to $19.22/oz, and palladium was steady at $2,146.84. Both are set for a weekly rise. Platinum rose 0.3% to $883.63, but is down for a second consecutive week.

Reuters