Gold firms as Powell dials back rate hike rhetoric

Gold prices rose on Wednesday, propped up by a subdued dollar after US Federal Chairman Jerome Powell signalled interest rates would not be hiked too quickly.

Spot gold rose 0.3% to $1,783.60 per ounce by 1156 GMT and US gold futures were 0.3% higher at $1,783.20.

Powell said on Tuesday that inflation would not be the only determinant in interest rate decisions, calming investors worried about policy tightening after the Fed's hawkish turn and sending the dollar near one-week lows.

The hawkish shift had sent gold down 6% last week, its biggest weekly decline since March 2020 when the COVID-19 pandemic hammered global markets.

Expectations of lower interest rates tend to support gold since that would translate into reduced opportunity cost of holding bullion, which pays no interest.

Gold tends to over-respond to a "nuanced delivery" from the Fed, independent analyst Ross Norman said.

The precious metal is seeing some bargain hunting given the recent big correction, and a move above $1,800 and back towards the mid-$1,800s could draw back the institutional investors, Norman added.

The focus will be on US Purchasing Managers' Indexes (PMI) data due later in the day, which is expected to stay at elevated levels, mirroring strength in France and Germany.

Gold could see a negative reaction if the US PMI comes in stronger than expected, while below consensus figures would have the opposite impact on bullion prices, said Quantitative Commodity Research analyst Peter Fertig.

On the technical front, gold seems to have stabilized, having bottomed out following last week's selloff, Fertig said.

Elsewhere, silver rose 0.7% to $25.92 per ounce and palladium climbed 1.2% to $2,587.51. Platinum was up 0.3% to $1,082.59.