Gold futures headed lower Tuesday, with commodity investors keeping an eye on congressional testimony by Federal Reserve Chairman Jerome Powell scheduled for later in the session.
Powell will testify before the House select subcommittee on the coronavirus pandemic at 2 p.m. Eastern, a half-hour after gold futures on Comex settle for the session.
Tuesday’s remarks will be the central bank’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, 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.
In Tuesday dealings, August gold fell $5.80, or 0.3%, at $1,777.30 an ounce, following a 0.8% gain on Monday for the precious metal.
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 are likely to see some choppiness in the trading session as the dollar and yields for government debt are perkier, weighing on the metal.
Rounding out action on Comex, silver for July delivery was trading 17.5 cents, or 0.7%, lower at $25.85 an ounce. July copper, however, added nearly 1.3% to $4.24 a pound.
July platinum rose 0.6% to $1,057 an ounce, but September palladium traded at $2,555 an ounce, down 0.1%.