Investing.com - Gold prices fell to a two-and-a-half year low on Tuesday, as a stronger dollar weighed on the precious metal and Federal Reserve Chair Jerome Powell backed gradual rate increases.
Comex gold futures for August delivery decreased 0.86% to $1,229.20 a troy ounce as of 10:37 AM ET (14:37 GMT).
The price of gold fell as Powell reiterated the central bank should gradually increase interest rates.
The Fed raised rates twice this year and is expected to raise rates at least once more before the end of the year. Higher rates are a negative for gold as the precious metal, which does not pay interest, struggles to compete with yield-bearing assets when rates rise.
However, uncertainty around trade tensions made analysis difficult, he said before the Senate Banking Committee on Tuesday.
“It is difficult to predict the ultimate outcome of current discussions over trade policy as well as the size and timing of the economic effects of the recent changes in fiscal policy,” he said.
Meanwhile the dollar rallied, which also weighed on the metal. Gold falls as the dollar rises, as the precious metal is denominated in the U.S. currency and is sensitive to moves in the dollar.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, rallied 0.31% to 94.56.
Bullion becomes more expensive for holders of other currencies when the dollar rises and cheaper when it falls.
Elsewhere on the Comex, silver futures were down 1.34% to $15.600 a troy ounce. Among other precious metals, Platinum Futures slumped 0.64% to $821.10 while Palladium Futures decreased 0.71% to $907.00 an ounce. Copper futures lost 0.34% to $2.755 a pound.