Gold hit its lowest in a year on Tuesday as the dollar steadied and most other markets were subdued before Federal Reserve Chair Jerome Powell testifies to the U.S. Congress.
Powell will likely reiterate the Fed`s plan for gradual monetary policy tightening as he takes his upbeat view of the U.S. economy to Capitol Hill later this session. Markets will focus on his views on recent trade tensions, however.
The dollar held steady below a one-year high on Tuesday as traders awaited Powell`s testimony for clues on the future rate outlook as well as risks from trade conflicts. The greenback has put in a solid performance this year amid the trade disputes.
"The problem here is even though you have safe haven factors that should in theory support gold, you`re having them drive investors to the safe haven of the dollar. That`s the biggest headwind for gold," said Nikos Kavalis, director at Metals Focus.
A strong dollar tends to weigh on gold by making the dollar-priced metal costlier for non-U.S. investors.
Spot gold was down 0.7 percent at $1,231.89 an ounce at 1329 GMT, having hit its lowest since last July at $1,230.40 The precious metal is down some 5 percent for the year.
U.S. gold futures for August delivery were down 0.8 percent at $1,231.80 an ounce.
The International Monetary Fund warned on Monday that escalating trade conflicts following U.S. tariff actions threaten to depress medium-term growth prospects.
The comments came as China reported slower growth in the second quarter, though Beijing said on Tuesday it would not affect its 2018 growth target.
UBS economists lowered their estimates for Chinese growth on Tuesday to take into account trade war escalation.
"If China is slowing down, there will be consequences to global commodity consumption and that`s going to drag gold down as well," said Richard Xu, a fund manager at China`s biggest gold exchange-traded fund, HuaAn Gold.
"Investor appetite for gold is not very strong. Chinese gold ETF liquidity has dropped a lot these days so that means people do not see any major breakthrough in either direction."
Demand for gold in top consumer China has been weak as an ongoing trade war with United States has weakened the local currency.
Spot gold is expected to break a support at $1,237 per ounce and fall to the next support at $1,226, according to Reuters technical analyst Wang Tao.
Holdings in SPDR Gold Trust, the world`s largest gold-backed exchange-traded fund, fell 0.15 percent to 794.01 tonnes on Monday.
Silver fell 1.1 percent to $15.57 an ounce, platinum fell 0.5 percent to $818.20 an ounce and palladium fell 0.7 percent to $910.90.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)