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PRECIOUS-Gold gains as Fed's Powell offers respite from big rate hike jitters

PRECIOUS-Gold gains as Fed's Powell offers respite from big rate hike jitters

Reuters · 07/27/2022 22:30
PRECIOUS-Gold gains as Fed's Powell offers respite from big rate hike jitters

Dollar at three-week low

Fed raises rates by 75 basis points as expected

Global gold demand down 8% in Q2 - WGC

Recasts, adds comments, details and updates prices

By Brijesh Patel

- Gold prices extended gains on Thursday after comments from the U.S. Federal Reserve chair Jerome Powell on future interest rate hikes sounded less hawkish than feared, dragging the dollar and Treasury yields lower.

Spot gold XAU= was up 0.2% at $1,737.44 per ounce, as of 0205 GMT, after rising 1% to a two-week high in the previous session. U.S. gold futures GCv1 rose 1% to $1,736.70 per ounce.

The U.S. central bank on Wednesday raised rates by three-quarters of a percentage point for the second straight meeting to combat soaring inflation.

Powell said another "unusually large" increase in interest rates may be appropriate at the September meeting, but the decision will be determined by the incoming economic data and it would give forward guidance.

"Powell left the door slightly open to a review of the rate situation and provided some sort of light at the end of the tunnel that we're going to be seeing increasing rates going into year as well," said Edward Meir, an analyst with ED&F Man Capital Markets.

"That knocked the dollar and U.S. yields down causing the flurry we saw in gold. In the -term, gold prices are expected to move higher with good chance of testing resistance between $1,780 to $1,800 over the month."

The dollar =USD fell 0.6% overnight and was languishing a three-week low on Thursday, making greenback-denominated gold less expensive for other currency holders. USD/

Benchmark U.S. Treasury yields US10YT=RR fell to hover two-month lows. Lower bond yields reduce the opportunity cost of holding -interest bearing gold. US/

Meanwhile, a sharp fall in purchases by investors pulled global gold demand down 8% in the second quarter compared to the same period in 2021, the World Gold Council said.

Elsewhere, spot silver XAG= gained 0.4% to $19.20 per ounce, platinum XPT= rose 0.4% to $890, and palladium XPD= climbed 0.6% to $2,042.51.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu and Uttaresh.V)

((Brijesh.Patel1@thomsonreuters.com; Within U.S. +1 651 848 5832, Outside U.S. +91 8067493865; Reuters Messaging: Brijesh.Patel1.thomsonreuters.com@reuters.))