Gold falls as hawkish Fed lifts U.S. dollar and yields

Gold prices extended losses to a more than one-week low on Thursday as the U.S. dollar and Treasury yields rallied after U.S. Federal Reserve Chairman Jerome Powell signaled an interest rate increase in March

Spot gold was down 0.5% at $1,808.66 an ounce by 1318 GMT, having dropped nearly 1.6% in the previous session. U.S. gold futures fell 1.3% to $1,806.20

“The reaction was normal in the sense that Chairman Powell stressed the strength of the economy and the determination to fight inflation,” said Commerzbank commodities analyst Carsten Fritsch

Powell struck a hawkish tone on Wednesday, flagging a rate increase in March. That sent U.S. Benchmark 10-year yields close to one-week highs while the dollar rose to its strongest in more than a month

Higher yields and interest rates dent the appeal of bullion by raising the opportunity cost of holding non-yielding gold

During the past few days gold benefited from weakness in equities markets, underpinning its status as a safe haven, but the Fed comments hit both gold and equities, showing that the economic outlook as presented by the Fed is much more important for the gold market, Fritsch added

Gold prices have declined by about 2.5% since hitting their highest in 10 weeks on Tuesday

A faster pace of rate increases in a potentially slowing economy with inflation not going down any time soon should be supportive for gold, said Saxo Bank analyst Ole Hansen

Investors await U.S. weekly jobless claims data, a measure of the country’s economic health, at 1330 GMT. U.S. gross domestic product figures later on Thursday are expected to show annual growth at its strongest since 1984

Elsewhere, spot silver fell 2% to $23.02 an ounce, platinum slipped 1% to $1,020.63 and palladium was down 2.1% at $2,279.85