Gold has posted sharp losses in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1314.53 down 1.40% on the day. In economic news, Federal Reserve Chair Jerome Powell made his first appearance before Congress. Meanwhile, durable goods reports were dismal. Core Durable Goods declined 0.3%, short of the estimate of +0.4%. This marked the second decline in three months. Durable Goods plunged 3.7%, missing the estimate of -2.4%. This reading was the sharpest decline since July. There was better news from CB Consumer Confidence, which improved to 130.8, well above the estimate of 126.2 points. On Wednesday, the US releases Preliminary GDP, with an estimate of 2.5%.
There were no dramatic moments during Jerome Powell’s testimony before a congressional committee on Tuesday. Powell was cautious, saying that the Fed planned to continue its current policy of gradual rate increases, despite the stimulus of government spending and recent tax reform. Powell sounded optimistic about economic conditions, noting that the US economy was benefiting from the global recovery as well as changes in fiscal policy. Importantly, Powell did not address the question of an acceleration of rate hikes. Currently, the Fed has projected three rate hikes in 2018, with a March hike priced in at 87%, according to the CME’s Fed Watch. However, with inflation moving higher and the economy continuing to perform well, many analysts expect the Fed to raise rates four or more times this year. Any hints at an increased pace of rate hikes could send the US dollar broadly higher.
Gold often moves higher when key US indicators point downward, but that has not been the case in the Tuesday session. Despite very soft durable goods reports for January, the dollar has posted gains against other major currencies and has surged against gold. Investors have given the greenback a thumbs-up after Jerome Powell’s testimony earlier, in which he pointed to solid economic conditions and reiterated the need for further rate hikes. Gold has dropped to a 2-week low, and the slide could continue if sentiment over the dollar remains positive.
