This post was originally published on this site
Gold futures logged their third decline in four session on Tuesday, with commodity investors eying congressional testimony by Federal Reserve Chairman Jerome Powell for hints on next price direction for the precious metal.
Futures prices settled lower about a half hour before Powell was due to begin his testimony to the House select subcommittee on the coronavirus pandemic.
Tuesday’s remarks will be the central bank chief’s first since last Wednesday when he acknowledged that policy makers had started to discuss the eventual reduction of the Fed’s monthly bond purchases.
The Fed last week surprised markets at its policy meeting by revealing policy makers now expect two interest rate increases by the end of 2023, earlier than previously anticipated.
In prepared testimony released late Monday, Powell said that the Fed “will do everything we can to support the economy for as long as it takes to complete the recovery.”
Powell’s prepared testimony “highlights inflation and reiterates the not uniformly agreed to concept of ‘transitory’ inflation in nature,” said Jeff Wright, chief investment officer at Wolfpack Capital. “Gold is softer given uncertainty in timing for a future Fed response.”
The issue for gold is ‘transitory’ inflation is “not an objective measurement and widely open to interpretation,” explained Wright. “The response of higher rates from Fed is most direct response to curb inflation, but difficult to pin point when [the] Fed will begin this process — first with tapering asset purchases and then actually raising rates; most likely late 2022 at earliest.”
Wright said he does not believe gold will snap back quickly, but the metal “does appear to have found solid support right below $1,800. “If Chair Powell is dovish in tone when answering questions gold could rally back above $1,800,” he said.
On Tuesday, August gold
GC00,
GCQ21,
fell $5.50, or 0.3%, to settle at $1,777.40 an ounce, following a 0.8% gain on Monday for the precious metal.
Cleveland Federal Reserve President Loretta Mester on Tuesday said she didn’t want to adjust the central bank’s easy monetary policy stance until the labor market made more progress over the summer. Gold benefits from a looser monetary policy that supports lower interest rates.
On Monday, gold scored a partial rebound from sharp losses last week, but is still seen in a downtrend that has taken it below psychologically significant levels at $1,900 and $1,800.
“The market is consolidating between $1,770 and $1,800 following last week’s sell-off as investors struggle to get more clarity on the near-term outlook for gold,” wrote Pierre Veyret, technical analyst at ActivTrades, in a Tuesday note.
Prices for precious metals moved lower Tuesday even as the dollar
DXY,
weakened. Yields for government debt were mixed, with the 10-year Treasury note yield lower, but 30-year Treasury note higher.
Rounding out action on Comex, silver for July delivery
SIN21,
lost nearly 0.7% at $25.86 an ounce. July copper
HGN21,
however, added 1.1% to $4.23 a pound.
July platinum
PLN21,
rose 1.8% to $1,070.20 an ounce, but September palladium
PAU21,
settled at $2,558.90 an ounce, down 0.02%.
