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Gold hits 1-month low on robust dollar, hawkish Powell

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Gold prices fell to a one-month low on

Monday, as U.S. Federal Reserve Chair Jerome Powell’s stance to

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continue with aggressive monetary policy to bring down inflation

dented the zero-yielding metal’s appeal and boosted the dollar.

Spot gold was down 0.9% to $1,721.16 per ounce, as of

0738 GMT, after hitting its lowest since July 27 at $1,720.31

earlier in the day. U.S. gold futures dropped 1% to

$1,732.30.

The dollar index scaled a 20-year high, making

greenback-priced bullion more expensive for overseas buyers.

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Gold’s momentum has turned lower and while at some point

there will be safe-haven flows, investors are currently focusing

on interest rates remaining high, said Matt Simpson, a senior

market analyst at City Index.

In a speech kicking off the Jackson Hole central banking

conference in Wyoming on Friday, Powell said the Fed would

continue to raise rates to curb inflation even as it caused pain

for households and businesses.

Markets are now largely pricing in a 75-basis-point rate

hike at the Fed’s September meeting.

European Central Bank policymakers also made the case for a

large rate hike next month even as recession risks loom.

Gold is considered a hedge against economic risks, but

rising interest rates increase the opportunity cost of holding

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bullion.

Once the market digests the fact that interest rates are

likely to remain elevated for some more time, the focus will

turn to economic slowdown caused by the hikes and that is likely

to support gold prices, said Sugandha Sachdeva, vice president

of commodity and currency research at Religare Broking.

“At the moment, the $1,680 mark looks like a sacrosanct

level. We may see prices slipping below that amid the steep

advance in the rival greenback, but we don’t expect prices to

close below that pivot, rather they look primed to witness a

rebound.”

Spot silver hit a one-month low and was last down

1.7% at $18.56 per ounce. Platinum slid 0.9% to $855.89

and palladium was flat at $2,110.43.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi

Aich and Subhranshu Sahu)

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