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• Gold drops for the second day as safe-haven appeal wanes, despite Powell highlighting increased downside risks.
• Powell states the Fed can delay action for clarity, noting tariffs may prolong inflation and unnerving Gold bulls.
• Hawkish Fed tone boosts DXY by 0.47% to 102.56; deepening yield curve inversion stokes recession concerns.

Gold (XAU) prices are extending on Friday their drop for the second consecutive day, hitting a seven-day low of $3,023 per troy ounce, down more than 2.80% as Federal Reserve Chair Jerome Powell turned hawkish in a conference in Virginia.

XAU/USD sinks to $3,023 as Fed Chair warns tariff-driven inflation could linger, dashing hopes for near-term rate cuts
 

Powell said that monetary policy is well-positioned to wait for clarity before considering adjustments on monetary policy, adding that “Tariffs likely to raise inflation in coming quarters; more persistent effects possible.”

He added that measures of long-term inflation are “well anchored” and that the US central bank's obligation is to be sure that a “one-time increase in price levels doesn't become an ongoing inflation problem.”

Regarding the economy, he added that the outlook is highly uncertain and that despite the fact that the economy is in a good place, downside risks have risen.

As Powell answered questions, Gold prices extended their losses. It should be noted that the Greenback is being bid, with the US Dollar Index (DXY) rising 0.47% to 102.56.

Money market traders had priced in over 1% of Fed easing by 2025. This is due to a pessimistic scenario about the economic outlook. Investors had begun to price in a recession, as the US 10-year to 3-month yield curve has deepened its inversion, with the latter paying 25 basis points more than the 10-year T-note yield.

Gold price reaction
 

Gold is puking at the time of writing, as sellers continue to push prices lower, with them eyeing a challenge of the $3,000 mark. If cleared, that will put into play the 50-day Simple Moving Average (SMA) at $2,937, followed by the $2,900 figure. On the other hand, if XAU/USD edges up, buyers need to reclaim $3,100 if they would like to regain control.

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