Gold slips to 1-year low as US dollar firms

London: Gold prices sank to a fresh one-year low on Thursday as the dollar powered higher following comments from U.S. Federal Reserve chairman Jerome Powell which reaffirmed expectations for more interest rate rises in the world`s largest economy.

Powell, in a closely watched two-day congressional testimony, said he believed the United States was on course for years more of steady growth, and carefully played down the risks to the U.S. economy of an escalating trade conflict.

The Fed raised rates in June and policymakers indicated they expect two more rate increases this year. Powell said nothing in his testimony this week to undermine that, and said the economy was poised for several more years of growth.

Gold is highly exposed to interest rates, particularly in the United States, as higher rates lift the opportunity cost of holding non-yielding assets and boost the dollar, in which gold is priced.

Spot gold fell 0.8 percent to $1,216.61 per ounce by 0940 GMT, having touched its lowest since July. U.S. gold futures for August delivery were 0.9 percent lower at $1,216.56 an ounce.

"It`s a tough environment for gold," said ETF Securities associate director Anneka Gupta, adding that growth in the U.S economy and stronger corporate earnings undermined the yellow metal.

"Gold is not being used as a safe haven right now despite the ongoing trade war and the stronger dollar is dominating the story amidst the rate-rising environment."

Gold is generally regarded as a safe and stable store of value during times of global uncertainty.

The dollar held firm against its peers, supported by bullish comments from Powell, which affirmed expectations for more interest rate increases this year.

"Gold should find first support at yesterdays low of $1221, with the psychological $1200 level to follow. Resistance at $1,229 with this weeks high of $1,245 above that," MKS PAMP Group said in a note.

U.S. President Donald Trump said on Wednesday the United States may hammer out a trade deal with Mexico, and then do a separate one with Canada later, sowing fresh doubts about the future of the North American Free Trade Agreement (NAFTA).

Among other precious metals, silver was down 2 percent at $15.21 an ounce, its lowest since last July.

Platinum was 1.5 percent lower at $801.50 an ounce. In the previous session, dropping to more than a two-week low of $798.14.

Palladium fell to its lowest since August 2017 at $894.97.