Gold is trading at Rs 35,800 per 10 gram tracking positive overseas trend after US Federal Reserve Chairman hinted at a rate cut.
In testimony to Congress, Mr Powell pointed to "broad" global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the trade conflict with China and other nations.
As a result, the U.S. dollar index, a gauge of the greenback against a basket of other major currencies, fell 0.4 per cent to 97.10 shortly before the settlement of gold futures. In India, the gold prices also witnessed a spurt following the government's Budget announcement to hike Customs duty on gold import from existing 10 per cent to 12.5 per cent.
Spot gold shed 1% to $1,404.40 per ounce as of 1:30 p.m. EDT (1730 GMT), dropping almost $15 after USA consumer prices demonstrated a pick-up in underlying inflation, increasing in June by the most in almost 1-1/2 years.
For the rest of the day, gold contracts on MCX are seen at 34,428-35,458 rupees per 10 gm.
"The Fed chair's cautious stance on the United States economy raised hopes of an imminent interest rate cut that spurred investor sentiments towards safe assets like gold", said Hareesh V, head (commodity research), Geojit Financial Services.
"Once we get a quarter-point rate cut, which markets are widely expecting, Powell will keep all options open on the table, and that means the dollar's outlook is uncertain", said Manuel Oliveri, an FX strategist at Credit Agricole in London.
Powell's comments also prompted the dollar index to decline as much as 0.4% against a basket of other currencies.
"The macro factors are still supportive (of gold) but the near term headwinds are likely to come from weaker physical markets and any temporary bouts of dollar strength or a bounce in yields".
On the trade war front, US and Chinese trade officials held "constructive" talks on trade by phone on Tuesday, White House economic adviser Larry Kudlow said on Tuesday.
Spot gold prices (XAUUSD) have reclaimed the $1,400 level driven by a 1% jump in the precious metal as commodity traders react to the latest bit of dovish language from Fed Chair Powell during Wednesday morning trading.
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