Gold stalls for policy clues from Fed's Powell

Gold prices were little changed in choppy trade on Tuesday with gains kept in check by a firm dollar as investors turned their attention to US Fed chief Jerome Powell's testimony for cues on monetary policy.

Spot gold held around $1,783.31 per ounce by 1134 GMT, recouping initial declines and staying well off the seven-week lows hit last week in the wake of Fed's surprise hawkish signal last Wednesday.

US gold futures were up 0.1% to $1,784.6 per ounce.

Michael Hewson, chief market analyst at CMC Markets, said the recent gold selloff was "slightly too aggressive" and as markets digested the policy shift "we could see some rebound over the next couple of days" towards the $1,800-$1,820 area.

Gold prices fell 6% last week, their biggest weekly slide since March 2020, after the Fed signalled interest rates could rise in 2023. They clawed back some losses on Monday as the dollar rally paused and traders used the dip to buy. .

Higher rates and bond yields reduce the opportunity cost of holding gold, a non-interest bearing asset. The dollar index rose 0.2% on Tuesday.

Powell, who will appear before Congress from 1800 GMT, in prepared remarks said inflation had "increased notably in recent months".

That is keeping many pessimistic about gold's prospects. Reflecting those jitters, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3% on Monday.

"Gold markets must now figure out if the June FOMC is indeed a structural shift in the outlook," Citi Research said in a note.

"The boost in Fed growth and inflation forecasts, and improved labor market projections, could embolden gold bears in the very short run."

Elsewhere, silver rose 0.1% to $25.96 per ounce, palladium eased 0.2% to $2,580.54, and platinum was trading 1% higher at $1,063.53.