Gold slides 1% on strong US housing data, firmer dollar

Gold

Gold retreated 1% on Tuesday on strong U.S. housing starts data and a firmer dollar, while traders looked to Federal Reserve Chair Jerome Powell's testimony for cues on the interest rate strategy.

Spot gold shed 1% to $1,929.98 per ounce by 10:31 a.m. EDT (1431 GMT), its biggest daily decline in nearly two weeks.

U.S. gold futures fell 1.5% to $1,941.20.

U.S. single-family homebuilding surged in May to its highest in more than a year and permits issued for future construction also climbed.

The "blowout number" has weighed on the gold market which was already "relatively weak after the last interest rate decision," said Daniel Pavilonis, senior market strategist, RJO Futures.

"The war in Ukraine seems relatively contained, supply chains are easing, interest rates are normalized, stock market is high, so what do you need to own so much gold for? … Ultimately, I think gold's done for a little while," Pavilonis added.

The dollar rose 0.2%, making bullion a less attractive bet for holders of other currencies. [USD/]

Commerzbank analysts lowered their gold price estimate for the second half of 2023 by $50 to $2,000 per ounce, seeing another rate hike by the Fed in July and no rate cuts until the second quarter next year.

Higher interest rates increase the opportunity cost of holding non-yielding bullion. [US/]

Traders see a 72% chance of a 25-bps rate hike in July, with rate cuts expected only when 2024 begins, according to CME's Fedwatch tool.

Markets awaited Fed Chair Powell's testimony on Wednesday on twice-yearly reports to Congress on the state of monetary policy.

Inflation in key parts of the U.S. service industry "remains elevated and has not shown signs of easing," the Fed said in the report ahead of Powell's testimony.

Spot silver plunged 3.7% to $23.07 per ounce, its lowest in three weeks, while platinum was down 2.3% to its lowest since March 29 at $953.56.

Palladium dropped 3.3% to $1,359.66.