Gold plunges as greenback rallies to 1-1/2 month peak, investors await Fed Powell's testimony
Gold prices declined, sliding to its lowest level in more than a month on a broader market sell-off driven by uncertainty over more U.S. fiscal stimulus and a stronger dollar.
Spot gold was trading 0.4 percent down at $1,904.78 per ounce by 0926, having hit a low of $1882.42 the day before, its lowest since August 12. On Monday, the safe-haven metal plunged over 3 percent but retraced to close 1.9 percent lower at $1912.67. U.S. gold futures eased 0.1 percent at 1,909.10. Gold prices are down nearly 10 percent from an all-time high hit in early August.
The dollar index surged against its rivals, recording its highest daily percentage gain since March 19 on Monday after the Federal Reserve Chair Jerome Powell said that the central bank remains committed to use all the tools at its disposal to help the U.S. economy recover from the effects of the coronavirus pandemic.
Powell’s comments were in line with what he said last week after the Fed’s latest policy meeting, at which policymakers promised to keep interest rates near zero until the economy reaches full employment and inflation is on track to modestly overshoot the central bank’s 2 percent target.
The safe-haven metal's downside appears limited as worries over rising COVID-19 cases in Europe and ebbing enthusiasm for fiscal stimulus in the United States could dent the global recovery from the pandemic.
The U.S. Congress has for weeks remained deadlocked over the size and shape of a fifth coronavirus-response bill. This week the U.S. Congress considers legislation to fund the federal government through mid-December, but a dispute over farm aid raised doubts about whether lawmakers can avoid a government shutdown ahead of the Nov. 3 elections.
Investors now await speeches by Federal Reserve committee members, including Chairman Jerome Powell’s appearance with Treasury Secretary Steven Mnuchin at a congressional committee.
The greenback against a basket of currencies traded 0.2 percent up at 93.70, having touched a high of 93.89 earlier, its highest since August 12. The U.S. Treasury yields surged, with the benchmark 10-year note yield trading at 0.669 percent.