Gold retreats after Powell signals tight monetary policy

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Gold fell 1% on Friday after Federal

Reserve Chair Jerome Powell in his speech at Jackson Hole said

the U.S. economy will need tight monetary policy “for some time”

before inflation is under control.

Powell said this could mean slower growth, a weaker job

market and “some pain” for households and businesses, but did

not hint at what the Fed might do at its upcoming September

policy meeting.

Spot gold fell 1% to $1,740.79 per ounce by 11:05

a.m. ET (1505 GMT), en route to a second straight weekly

decline, down about 0.4% so far. U.S. gold futures

dropped 1.1% to $1,752.60.

“Powell’s statements were quite hawkish and since there was

no dovish pivot, gold will continue to face pressure as it will

have to deal with higher interest rates,” said Philip Streible,

chief market strategist at Blue Line Futures in Chicago.

Gold is considered a hedge against inflation and economic

uncertainties. But rising interest rates make the non-yielding

asset less appealing.

“Gold needs to capture $1,800 in order to gain its momentum,

otherwise $1,740s is key level support,” Streible added.

U.S. two-year Treasury yields briefly popped to their

highest since October 2007 before stabilizing near two-month

highs.

Bullion’s dip came despite a weaker dollar.

Earlier in the day, investors took stock of data showing

U.S. consumer spending barely rose in July, but inflation eased

considerably.

In physical markets, gold premiums in China jumped this week

to their highest since last October, while demand cooled in

India.

Spot silver fell 1.3% to $19.03 per ounce.

“Silver prices are particularly vulnerable given the

observed deterioration in commodity demand, given the metal

holds little exposure to the rise in supply risk premia that has

been supporting industrial metals,” TD Securities said in a

note.

Platinum fell 1.2% to $870.44, and palladium

fell 0.3% to $2,140.48.

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by

Jonathan Oatis and Shailesh Kuber)

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