Gold extended falls to a one-year low on Thursday as the US dollar firmed after Federal Reserve Chairman Jerome Powell asserted the need for further interest rate hikes amid a strong economy. Spot gold was down 0.2 percent at $1,223.56 an ounce at 0703 GMT. The yellow metal slipped to its lowest since July last year at $1,220.41 an ounce earlier in the session.
US gold futures for August delivery were 0.4 percent lower at $1,223.20 an ounce. "Gold market is just following the US dollar, the dollar is strong so it's pushing the market down," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
"The economy is still good and interest rate still up, so that's good for the US dollar and negative for gold for the time being." The dollar held firm against its peers, supported by bullish comments from Powell, which affirmed expectations for at least two more interest rate hikes this year.
"Rallies continue to be well sold and it is difficult to see a break toward $1,236 - $1,240 (in gold) with the current dollar strength," MKS PAMP Group said in a note. Fed's Powell in a closely watched two-day congressional testimony, said he believed the United States was on course for years more of steady growth, and carefully played down the risks to the US economy of an escalating trade conflict.
Spot gold has found a support zone of $1,220-$1,226 per ounce. It may hover above this zone for one more day or bounce towards a resistance at $1,237, Reuters technical analyst Wang Tao said.