Gold prices edged lower on Tuesday and the dollar index traded flat as investors await testimony from Fed Chair Powell for further guidance on the recent surprise shift in the central bank’s policy outlook.
Spot gold slipped 0.1 percent to $1,781.53 per ounce, while U.S. gold futures were down 0.1 percent at $1,781.35.
Gold prices slumped 6 percent last week, marking their biggest weekly slide since March 2020, after the Federal Reserve raised its forecast for inflation and shifted up the timeline for a rate hike.
Higher bond yields and interest rates reduce the opportunity cost of holding gold, a non-interest bearing asset.
Powell will testify before the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis later in the day.
He is due to discuss the Fed’s response to the pandemic but could also face questions about the outlook for monetary policy.
In his prepared remarks for hearing before Congress, Powell said that the current surge in inflation is likely to be transitory and it could move back to the Fed’s 2 percent target when supply imbalances are resolved.
The Fed chief gave a positive assessment of the labor market, saying that employment should pick up in coming months as vaccinations progress and the economy emerges from the pandemic.
“We at the Fed will do everything we can to support the economy for as long as it takes to complete the recovery,” Powell noted.
Powell’s remarks soothed some of the concerns about earlier-than-expected tapering and rate hikes by the Fed.