Gold, Dollar mostly flat as investors eye Fed Chair Powell’s testimony

Key points

Spot Gold and the US Dollar were mostly little changed on Tuesday, as market players were eyeing Federal Reserve Chair Jerome Powell’s testimony later in the week for further clues on the federal funds rate trajectory.

Fed Chair Powell is to testify at the House Financial Service Committee on Wednesday and at the Senate Banking Committee on Thursday, where he is expected to offer hawkish remarks.

Markets are now pricing in a 74% chance of a 25 basis point interest rate hike at the Fed’s July meeting, while rate cuts are not expected until the start of 2024, according to CME’s FedWatch tool.

Rising interest rates tend to weigh on the yellow metal’s appeal, as they are associated with a higher opportunity cost of holding Gold, which does not pay any interest.

Elsewhere, Asian and European shares tumbled on Tuesday after Beijing reduced the 1-year and the 5-year loan prime rates at a lesser pace than anticipated and investors waited for further details regarding China’s plans to prop up economic recovery.

Still, according to Peter Fertig, an analyst at Quantitative Commodity Research, Gold investment demand in China will probably remain strong in the short term because of economic uncertainties.

As of 12:36 GMT on Tuesday Spot Gold was inching down 0.04% to trade at $1,949.61 per troy ounce. The precious metal has been holding within a relatively tight trading range since mid-May.

Gold Futures for delivery in August were edging down 0.30% on the day to trade at $1,965.25 per troy ounce, while Silver Futures for delivery in July were down 1.07% to trade at $23.867 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.04% to 102.443 on Tuesday. Last Friday, the DXY went down as low as 102.006, which has been its weakest level since May 12th (101.937).