Gold slides one percent after Fed`s Powell confirms gradual rate hikes
Gold prices were down 1 percent Tuesday after the new U.S central bank chairman pledged to stick with gradual interest rate increases.
The current Fed consensus has signaled three to four rate increases this year.
“It seemed quite neutral in regards to rates moving forward,” said Bob Haberkorn, senior commodities strategist at RJO Futures.
Higher U.S. interest rates make bullion less attractive to investors since gold does not pay interest
“One thing that surprised some was that he seemed to directly mention the stock market and recent volatility as something they’re not concerned about,” said Jason Ware, chief investment officer of Albion Financial in Salt Lake City.
The dollar index surged to its highest in more than two weeks after Powell’s remarks. Stock prices fell, while on the bond market, traders boosted bets the Federal Reserve will squeeze in a fourth rate hike this year.
Some had investors expected Powell to be less hawkish, said Georgette Boele, commodity strategist at ABN AMRO in Amsterdam.
“Once they realize that the policy’s going to continue like it has, then the dollar should recover and gold move lower. With the positioning that’s in place, we’ll get profit-taking in long euros and long gold.”
Boele expects gold to slip under $1,300 an ounce by the end of the quarter.
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