Gold prices extended losses to a more than one-week low on Thursday as the U.S. dollar and Treasury yields rallied after U.S. Federal Reserve Chairman Jerome Powell signalled an interest rate increase in March.
Spot gold was down 0.5% at $1,809 an ounce by 1134 GMT, having dropped nearly 1.6% in the previous session. U.S. gold futures GCv1 fell 1.1% to $1,808.90. "The reaction was normal in the sense that Chairman Powell stressed the strength of the economy and the determination to fight inflation," said Commerzbank commodities analyst Carsten Fritsch.
Powell struck a hawkish tone on Wednesday, flagging a rate increase in March. That senr U.S. Benchmark 10-year yields close to one-week highs while the dollar .DXY rose to its strongest in more than a month. Higher yields and interest rates dent the appeal of bullion by raising the opportunity cost of holding non-yielding gold.
During the past few days gold benefited from weakness in equities markets, underpinning its status as a safe haven, but the Fed comments hit both gold and equities, showing that the economic outlook as presented by the Fed is much more important for the gold market, Fritsch added. Gold prices have declined by about 2.5% since hitting their highest in 10 weeks on Tuesday.
A faster pace of rate increases in a potentially slowing economy with inflation not going down any time soon should be supportive for gold, said Saxo Bank analyst Ole Hansen. Elsewhere, spot silver fell 1.5% to $23.12 an ounce, platinum slipped 0.7% to $1,023.89 and palladium was up 1.1% at $2,354.24.