Gold eased after two days of gains as investors awaited testimony from Federal Reserve Chair Jerome Powell, and weighed the prospect of a large US stimulus package moving closer to approval.
Powell’s semi-annual report at the Senate Banking Committee Tuesday and Wednesday at the House Financial Services panel will be monitored for further policy guidance and his assessment of the recovery. Meanwhile, the House Budget Committee advanced President Joe Biden’s $1.9 trillion pandemic-relief legislation, paving the way for it to pass the lower chamber by the end of this week.
Bullion is rebounding after a 2.2% drop last week as traders refocus on rising inflation expectations and the potentially massive economic stimulus. Holdings in bullion-backed exchange-traded funds have seen steady outflows, with the largest SPDR Gold Shares registering the biggest loss since November on Monday.
“Investors are anticipating a large US fiscal stimulus bill to be passed, which may strengthen the reflation theme and inflation outlook,” said Margaret Yang, a strategist at DailyFX. “Powell is likely to reiterate the Fed’s accommodative stance despite the rising inflation outlook. The weakness in the US dollar is reflecting the market’s expectation of a dovish-biased speech, which will be supportive to gold.”
Spot gold declined 0.2% to $1 806.44 an ounce by 10:20 a.m. in London, after rising 1.9% over two days. Silver, platinum and palladium all fell. The Bloomberg Dollar Spot Index was little changed.
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