[Click here for an interactive chart of gold prices]
Meanwhile, the dollar index hit a fresh 16-month peak and Treasury yields firmed after Powell was nominated for a second term, adding to confidence that the US central bank will lift interest rates in 2022.
“The gold market had bet on Lael Brainard to be the next Fed chair, as she is considered to be more dovish than Powell in terms of monetary policy or stimulating the economy longer,” Julius Baer analyst Carsten Menke told Reuters.
“Therefore, the breach of $1,800 level could put further selling pressure on gold,” Menke added.
Investors are betting that newly renominated Fed chairman will need to step up the pace at which the central bank is normalizing monetary policy to better grapple with surging consumer prices.
While gold is considered a hedge against inflation and other uncertainties, a likely hike in rates would increase the opportunity cost of holding non-yielding bullion.
But it’s “too early to write off gold,” said Ross Norman, an independent analyst.
“Inflation still has legs to run, and there are covid-19 restrictions in Europe once again. But the onus is on the bulls to prove their case and garner support, failing which the metal could drift lower again,” Norman added.
(With files from Reuters)
