Gold Dips as Powell Speech Takes Centre Stage; Palladium Hits 5-Yr Low

GOLD - Gold fell for a third straight session on Wednesday, with markets focusing on Federal Reserve Chair Jerome Powell's remarks, while auto-catalyst palladium extended its retreat to a five-year low.

Spot gold was down 0.3% at $1,961.70 per ounce by 1227 GMT. U.S. gold futures slipped 0.2% to $1,968.80.

Silver dropped 0.9% to $22.41.

Safe-haven demand for gold is cooling as "there is some perception that the conflict in the Middle East might be contained to just Israel and Hamas," said Edward Gardner, commodities economist at Capital Economics.

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"Gold price reaction will very much depend on how the market views Powell's comments."

The dollar index rose 0.2% ahead of Powell's speech, making greenback-priced metals less alluring for other currency holders,

A slew of Fed officials on Tuesday maintained a balanced tone on the central bank's next decision, but noted they would focus on more economic data and impact of higher long-term bond yields.

Powell will speak at 9:15 a.m. ET and at 2:00 p.m. ET on Thursday.

"We forecast the Fed to cut rates faster than the market expects next year ... The lower government bond yields in the U.S. next year will give a boost to demand for gold," said Gardener.

Lower interest rates boost appeal for bullion, which is a non-yielding asset.

Elsewhere, palladium hit its lowest levels since October 2018 at $1,007.73 earlier in the session and was down 3.2% at $1,022.36. Platinum eased 1.5% to $878.24.

Both metals are used in emissions-controlling devices in cars.

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Analysts have attributed the slide partly to substitution from palladium to cheaper platinum in combustion engine vehicles, with a wider shift to electric vehicles also to blame.

"Large price swings in palladium are not unusual considering its small market size and low liquidity," said UBS analyst Giovanni Staunovo, adding recent strikes in the U.S. auto industry could also have weighed on demand.