Gold falls on firm dollar as focus turns to Powell speech

Gold prices fell on Wednesday as the dollar gained while investors waited for US Federal Reserve Chairman Jerome Powell's speech for a snapshot of the central bank's monetary plan to revive the pandemic-hit US economy.

Spot gold was down 0.6% at $1,915.61 an ounce by 1203 GMT. US gold futures eased by 0.1% to $1,921.40.

The dollar index <.DXY > was up 0.2%, making bullion more expensive for those holding other currencies, with the spotlight on Powell's address at Jackson Hole on Thursday, when he is set to offer more insight on the US central bank's strategy on inflation and monetary policy.

"The firmer dollar is weighing on gold ... Though investors are watching out for Powell's speech, they've mostly factored it into gold prices already. The US cannot raise interest rates and lowering them also doesn't look likely," said Michael Hewson, chief market analyst at CMC Markets UK.

"The Fed might take an unconventional measure, like more stimulus ... As long as social distancing is in place, the economy cannot rebound and that will keep supporting gold until the year-end."

Weighing further on gold, optimism over US-China trade relations boosted appeal for riskier assets.

Nonetheless, gold's outlook remained strong as buyers sought a buffer against potential inflation and currency debasement owing to central bank stimulus and near-zero global interest rates.

The safe-haven metal is up 27% this year.

"There are still a lot of concerns about the economy and they continue to indicate that rates are going be low and stimulus measures will continue, which should boost gold," said ANZ analyst Daniel Hynes.

Adding to doubts over an economic rebound from the coronavirus crisis, a survey from the Conference Board showed that US consumer confidence hit a six-year low in August.

In other precious metals, silver dipped 0.5% to $26.31 an ounce, platinum dropped 1.4% to $914.20 and palladium was down 0.4% at $2,156.53.