Gold prices plummet ahead of Powel’s testimony

Gold prices plummeted on Tuesday dropping to $1,930 per ounce. If gold prices increase, resistance may be encountered near $1,973 per ounce, while if gold prices decline, support may be found near $1,924 per ounce. 

Fed Chair Jerome Powell is due to testify about the Semi-Annual Monetary Policy Report before the House Financial Services Committee on Wednesday. His testimony is likely to affect gold prices in the wake of last week’s monetary policy decision. Expectations that Powel will signal further rate hikes down the road drove gold prices down on Tuesday.

The dollar’s movement has predominantly directed gold prices, as the competing gold typically loses appeal as an investment when the dollar rises. Dollar prices remained stable on Tuesday and the dollar index fluctuated with low volatility around the 102.6 level. US Treasury yields declined on Tuesday, with the US 10-year bond yielding 3.72%.

Major Central Banks continue to raise interest rates, causing economic uncertainty, which provides support for the safe-haven gold. The US Federal Reserve paused rate hikes last week, but the ECB raised interest rates by 25bps, boosting gold prices.

The U.S. Federal Reserve kept its interest rate steady at its policy meeting last week for the first time in well over a year. Fed officials have voted to keep the central bank’s interest rate at a target range of 5.00% to 5.25%. 

The Fed has signaled, however, that its tightening cycle is not over yet and that its peak rate might be higher than anticipated. The FOMC policy statement following the conclusion of the meeting was hawkish, hinting at further rate hikes. Expectations of additional monetary tightening boosted the dollar after the Fed meeting, driving gold prices down.

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Written by:
Myrsini Giannouli

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