Gold settled at a one-year low Tuesday for a third straight session, pressured by strength in the dollar as testimony from U.S. Federal Reserve Chairman Jerome Powell backed a steady pace of raises to benchmark interest rates.
August gold GCQ8, -0.95% lost $12.40, or 1%, to settle at $1,227.30 an ounce, marking the lowest settlement for a most-active contract since July 13, 2017, according to FactSet data. Prices also finished Friday and Monday at roughly one-year lows.
A popular fund tracking gold, the SPDR Gold Shares GLD, -1.06% edged down by 1% in Tuesday dealings.
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Markets looked to testimony from Powell who made it clear to the Senate Banking Committee that the central bank plans to continue raising interest rates at a pace of once every three months, for now. Powell will testify in front of the House Financial Services panel Wednesday.
Rising real interest rates impact the opportunity costs of holding gold because the metal provides no yield. Higher rates may also boost the value of the dollar which usually moves in the opposite direction of the gold price.
U.S. economic data Tuesday were upbeat. Industrial production rose 0.6% in June, while the National Association of Home Builders’ monthly confidence index was unchanged at 68 in July.
Gold prices had declined on Monday as U.S. economic data, notably better-than-expected retail sales, did little to unseat expectations for higher interest rates over coming months—an outlook that has partly underpinned a strengthening of U.S. dollars this year and helped to sink gold, which is priced in the currency.
Independent market analyst Stephen Todd said gold’s outlook lacks luster. “It still can’t get any strength together,” he said in a Tuesday research note. Todd who runs Todd Market Forecast said he prefers cash over gold and has been bearish on the metal since June 15.
On Tuesday, the ICE U.S. Dollar Index DXY, +0.48% a measure of the buck against a half-dozen rivals, tacked on nearly 0.5%. It has climbed by about 0.3% month to date.
“The dollar’s fundamental outlook remains bullish amid robust U.S. economic data and expectations of rising inflationary pressures on the economy,” said Lukman Otunuga, research analyst at FXTM, in a note. “Market speculation that the Federal Reserve will be raising U.S. interest rates two more times this year continues to heavily support the dollar.”
Meanwhile, industrial metals elsewhere on Comex moved lower. September silver SIU8, -1.18% lost 19.5 cents, or 1.2%, to $15.617 an ounce. September copper HGU8, -0.51% settled down 0.6% at $2.747 a pound. October platinum PLV8, -0.69% edged down 0.8% to $819.90 an ounce, while September palladium PAU8, -0.38% finished 0.5% lower at $909.20 an ounce.
