Why Is Gold Price Down Today?

The price of gold (XAU/USD) has dropped due to several factors including Powell’s announcement that the Federal Reserve may flag higher rates.

On March 8, 2023, gold prices dropped to a seven-day low after U.S. Federal Reserve Chair Jerome Powell said that interest rates may have to go higher than previously expected to combat inflationary pressures.

Spot gold slipped 0.2% at $1,810.84 per ounce, as of 0409 GMT. U.S. gold futures lost 0.4% to $1,813.60.

The U.S. Fed might have to raise interest rates more than previously expected in responding to recent strong data and is ready to move in bigger steps in case the ‘totality’ of the incoming information indicates harder measures are required to curb inflation, Powell said on the first day of his semi-annual, two-day testimony before Congress.

In the wake of Powell’s remarks on Tuesday, gold prices had plunged by up to 1.9%, or by over $30, to $1,812.55. Matt Simpson, a senior market analyst at City Index, stated:

“Nobody wants to buy gold today following the hawkish remarks from Powell … there’s also very little gold-selling, with prices pushing slightly lower but without conviction – gold almost looks startled today. A break below $1,800 is on the cards for gold.”

Higher interest rates mostly dull gold’s glitter since they increase the opportunity cost of holding an asset that does not bear any interest.

The United States central bank had slowed to a 25-basis-point hike in its last meeting, after bigger rate hikes in 2022 to combat decades-high inflation, but a slew of data in recent weeks increased fears that the Fed would persist with its monetary policy tightening.

Futures traders tied to the Fed’s policy rate have already priced in a 50 basis-point rate hike at the Federal Reserve’s March 21-22 policy meeting.

The dollar index reached a 3-month high, making bullion less affordable for buyers holding other currencies.

Investors are now waiting for the U.S. jobs report for February due on Friday.

Spot silver lost 0.5% to $19.95 per ounce, palladium fell 0.2% to $1,384.37, and platinum firmed 0.2% to $931.33.