PRECIOUS-Gold drops more than 1 pct as dollar strengthens during Fed testimony

LONDON: Gold hit its lowest in a year on Tuesday as the dollar steadied and most other markets were subdued before Federal Reserve Chair Jerome Powell testifies to the US Congress. Powell will likely reiterate the Fed’s plan for gradual monetary policy tightening as he takes his upbeat view of the US economy to Capitol Hill later this session. Markets will focus on his views on recent trade tensions, however.

A strong dollar tends to weigh on gold by making the dollar-priced metal costlier for non-US investors. Spot gold was down 0.7 per cent at $1,231.89 an ounce at 1329 GMT, having hit its lowest since last July at $1,230.40.

The precious metal is down some 5pc for the year. US gold futures for August delivery were down 0.8pc at $1,231.80 an ounce.

The International Monetary Fund warned on Monday that escalating trade conflicts following US tariff actions threaten to depress medium-term growth prospects. The comments came as China reported slower growth in the second quarter, though Beijing said on Tuesday it would not affect its 2018 growth target. UBS economists lowered their estimates for Chinese growth on Tuesday to take into account trade war escalation.

Demand for gold in top consumer China has been weak as an ongoing trade war with United States has weakened the local currency.

Spot gold is expected to break a support at $1,237 per ounce and fall to the next support at $1,226, according to Reuters technical analyst Wang Tao. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.15pc to 794.01 tonnes on Monday.

Silver fell 1.1pc to $15.57 an ounce, platinum fell 0.5pc to $818.20 an ounce and palladium fell 0.7pc to $910.90.