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Gold futures headed lower on Tuesday, pulling back after tapping their highest intraday level in a week as investors hear testimony from Federal Reserve Chairman Jerome Powell on monetary policy.
During the first of two days of congressional testimony, Powell told the Senate Banking Committee that there are signs that the economy is on the mend from the pandemic, but the Federal Reserve is likely to keep its easy policy in place for some time.
See the live blog: Fed Chairman Powell’s testimony to Senate Banking Committee
On Tuesday, April gold GC00, -0.09% GCJ21, -0.09% fell by $2.30, or 0.1%, at $1,806.10 an ounce after touching a high of $1,815.20 — the highest intraday level for a most-active contract since Feb. 16, FactSet data show.
The moves follow a surge of 1.7% Monday to mark the metal’s loftiest settlement since Feb. 12 and the biggest single-session dollar and percentage rise since early January.
Meanwhile, March silver SI00, -1.41% SIH21, -1.41% shed 43 cents, or 1.5%, to trade at $27.66 an ounce, following a surge Monday of over 3% to the highest finish since Feb. 1.
Powell has previously emphasized the central bank’s determination to hold off on pulling back on monetary stimulus until inflation has surpassed its target of 2%, but investors may be eager to hear what plans are for policy makers if a rise in rates undermine efforts to keep monetary policy accommodative.
“The marketplace will be especially keen to hear what Powell has to say about rising U.S. Treasury yields and the prospects for rising inflation,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily note. “The stock market has turned wobbly early this week due in part to worries about rising bond yields starting to pull away investor money from the stock market.”
The 10-year Treasury note yield BX:TMUBMUSD10Y has been steady at 1.357%, but government bond yields have been resurgent on the back of higher growth expectations driven by falling COVID-19 case counts, vaccine rollouts and anticipation of another fiscal relief program.
Gold has drawn bids in this environment because investors are worried about the impact a rapid rise of yields will have on appetite for assets perceived as risky, notably those in the highflying technology sector which tend to be more vulnerable to higher borrowing costs amid what many consider lofty valuations.
Powell’s prepared testimony Tuesday “was overwhelmingly dovish,” said Paul Ashworth, chief U.S. economist at Capital Economics, in a note Tuesday.
Ashworth said Powell concluded that the economy is a long way from the Fed’s employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. Those comments are “clear indication that, even with more massive fiscal stimulus this year, the Fed won’t slow the pace of its asset purchases until next year, with interest rate hikes still several years away,” said Ashworth.
That may bode well for gold, which tends to benefit from looser monetary policy.
Prices for gold pared some losses in the immediate wake of data Tuesday that showed Americans grew more confident in the economy in February.
The index of consumer confidence rose to a three-month high of 91.3 in February from a revised 88.9 in January, the Conference Board said Tuesday.
Meanwhile, March copper HGH21, +0.89% added 1% to $4.182 a pound, holding ground at the highest prices since 2011.
Read: Copper prices top $4 a pound for the first time in over 9 years
April platinum PLJ21, -3.36% shed 3% to $1,243.60 an ounce and March palladium PAH21, -2.49% lost nearly 2.5% to $2,333.50 an ounce.
