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Gold falls as dollar hold ground with focus on Powell’s speech

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Gold prices fell on Friday as the dollar

held near recent peaks and Treasury yields firmed while

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investors positioned for Federal Reserve Chair Jerome Powell’s

speech at Jackson Hole for indications on further rate rises.

Spot gold fell 0.7% to $1,746.00 per ounce by 1112

GMT. U.S. gold futures were 0.7% lower at $1,759.00.

The dollar index edged lower on the day, but was still well

within sight of a two-decade peak, hurting appetite for gold

among overseas buyers, with U.S. benchmark 10-year Treasury

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yields also firmer.

“With the dollar holding at near to 20-year highs and with

the 10-year treasury holding above 3%, gold has some serious

headwinds,” said independent analyst Ross Norman.

Powell is scheduled to speak at 1400 GMT at the conference

in Wyoming.

But some market participants do not expect a clear message

from Powell on the size of the next hike, with recent comments

on rates from Fed policymakers indicating they could go further.

“For gold, the outcome for price direction will likely be

the second order effect seen through the next dollar move,”

Norman added.

While gold is considered a safe bet during economic

uncertainty, interest rate hikes increase the opportunity cost

of holding the non-yielding asset.

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“If Powell wants to manage expectations, he could argue the

case that rates are likely to be higher for longer, thus making

rate cuts next year less likely. That could push yields up and

undermine gold prices,” said Michael Hewson, chief market

analyst at CMC Markets UK.

In physical markets, gold premiums in China jumped this week

to their highest since last October, but demand cooled in India.

Spot silver shed 0.5% to $19.19 per ounce, but was on

track for a weekly gain.

Platinum dropped 0.7% to $874.44, and palladium

fell 0.8% to $2,129.05.

(Reporting by Arundhati Sarkar in Bengaluru

Editing by Tomasz Janowski and David Evans)

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