Gold up as dollar cedes ground after Fed chief Powell's comments

FILE PHOTO: Production of gold at Krastsvetmet precious metals plant in Krasnoyarsk

By Seher Dareen and Bharat Gautam

(Reuters) - Gold eked out gains on Tuesday, tracking a slight pullback in the dollar and as investors digested comments from U.S. Federal Reserve Chair Jerome Powell on the outlook for rate-hike policy.

Spot gold rose 0.2% to $1,870.49 per ounce by 2:02 p.m. ET (1902 GMT). U.S. gold futures settled up 0.3% at $1,884.80.

Powell said on Tuesday the latest U.S. employment report showed the process for getting inflation back near the central bank's 2% target will take "quite a bit of time", noting further interest rate increases were needed.

In the wake of Powell's speech, the dollar slipped from one-month highs, sparking a jump in gold prices to as much as 0.8% earlier in the session. The greenback was last down 0.1% at 103.510.

"We may go a little bit higher but ultimately I think that we are due for more of a correction and this (rise) is just a pause," said Daniel Pavilonis, senior market strategist at RJO Futures.

Minneapolis Fed President Neel Kashkari on Tuesday said the U.S. central bank would perhaps have to raise interest rates to at least 5.4% to tame high inflation.

With Fed officials John Williams, Michael Barr and Christopher Waller due to speak during the week, "(they) are going to talk about having to continue to fight inflation, which would strengthen yields," added Pavilonis.

Gold is sensitive to high interest rates, which lift the opportunity cost of holding the non-yielding asset.

Analysts at Commerzbank forecast gold prices at $1,850 by mid-year and $1,950 by end-2023.

Spot silver fell 0.5% to $22.16 per ounce and platinum dipped 0.1% to $971.05, while palladium jumped 3.1% to $1,647.87.

(Reporting by Seher Dareen and Bharat Govind Gautam in Bengaluru; editing by Jonathan Oatis and Krishna Chandra Eluri)