Gold price fell on Friday after US Federal Reserve Chair Jerome Powell signalled higher interest rates during his speech in Jackson Hole.

Spot gold was trading at $1,922.54 an ounce as of 12:00 EDT ( 8 p.m., UAE time), down by nearly 1% (0.75%) from the previous day’s peak.

“Gold is facing challenges from two related fronts. One is the impact of higher Treasury yields. As US data shows a resilient economy, the possibility of further rate hikes remains open,” wrote Matias Salord, an FXStreet analyst, in a note.

Inflation battle

Powell indicated that the US Federal Reserve will not pause interest rate rises, as inflation is still “too high”.

“It is the Fed’s job to bring inflation down to our 2% goal, and we will do so. We have tightened policy significantly over the past year. Although inflation has moved down from its peak… it remains too high,” Powell said at the annual conference of central bankers.

“We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

The plan is to keep the benchmark rates between 5.25% and 5.5%, Powell said.

Headline inflation in the US skyrocketed after Russia’s invasion of Ukraine in early 2022.

The rate peaked at 7% in June 2022 and eased to 3.3% as of July. While the decline is a “welcome development”,  Powell said it remains uncertain whether the “lower readings will continue or where underlying inflation will settle over coming quarters.”

“Twelve-month core inflation is still elevated, and there is substantial further ground to cover to be back to price stability,” he noted.

Last month, the benchmark lending rate rose by a quarter point, the 11th adjustment since the Federal Reserve began its inflation battle in March 2022.

(Reporting by Cleofe Maceda; editing by Seban Scaria)