Gold hits its lowest level of the year

Reuters/David Gray

DATE IMPORTED:October 27, Security guard John Hall watches a stack of display gold bullion bars at the Australian Bullion Company's office in Sydney October 27.

• Gold hit its lowest level of the year.
• Federal Reserve Chair Jerome Powell signaled the central bank will continue rate hikes.
• Follow the yellow metal in real time here.

Gold hit its lowest level of the year on Tuesday as the dollar soared.

The yellow metal was down about 1% to $1,226.38 at 11:30 a.m., while the greenback held close to 2018 highs at 94.74 on the Dollar Index.

Gold prices have fallen more than 8% over the last three months amid a dollar rally that has lifted the currency to multiyear highs. Dollar-denominated commodities tend to move in the opposite direction to the greenback.

The selloff came ahead of Federal Reserve Chair Jerome Powell's testimony before Congress, where he said the central bank is on track to continue "gradually" raising rates "for now."

"Incoming data show that, alongside the strong job market, the U.S. economy has grown at a solid pace so far this year," he said.

The central bank, which raised the benchmark rate in June by 25 basis points to a range between 1.75% and 2%, is expected to raise rates two more times before the end of the year.

Simona Gambarini, a commodities economist at Capital Economics, said that a stronger dollar and slowdown in key gold consumers like China and Turkey could continue to put downward pressure on gold prices.

"While we still expect the gold price to edge higher over the coming months due to strong demand for safe havens and inflation hedges, the risks to our forecast have increased markedly in the past few months," Gambarini said.

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