Investing.com – Gold prices rebounded and were flat on Wednesday, after turned sharply lower overnight following Federal Reserve Chairman Jerome Powell’s comment that he expected the economy to be strong during the next two years, and that his personal outlook for growth has firmed since the end of last year.
Gold Futures for April delivery on the Comex division of the New York Mercantile Exchange were unchanged $1,318.60 a troy ounce by 11:57am ET.
Powell’s comments added to concerns that the Fed was rethinking its plan to add a fourth rate hike this year, instead of three, to contain inflation.
“We’ve seen some data that will in my case add some confidence to my view that inflation is moving up to target,” said Powell. “We’ve also seen continued strength around the globe, and we’ve seen fiscal policy become more stimulative.”
The dollar has been climbing up ever since Powell’s testimony at the Congress strengthened the Fed’s position in further interest rate hikes this year.
The US dollar index, which measures the greenback against a basket of six major currencies, rose to a three-week high at 90.39, up 0.08%, breaking the 90 handle.
10 year U.S. treasury yield also climbed back up to 2.90% after Powell’s upbeat view.
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
Meanwhile, Asian equities headed lower in morning trade on Wednesday following Powell’s comments. Hong Kong’s Hang Seng Index underperformed and slipped 1.7%, while the Nikkei and Shanghai Composite also fell 0.9% and 1.2% respectively.