Gold climbed after its biggest weekly decline in 15 months, with spot gold up nearly $20 to close at $1783.27 an ounce, boosted by a fall in the dollar and increased positions in exchange-traded funds. Gold-backed ETF positions rose the most in three months on Friday, according to preliminary statistics from Bloomberg. A dollar index fell for the first time in seven days, boosting gold's attractiveness as an alternative asset. Gold prices fell last week as the Fed hinted that monetary policy could be tightened sooner than many economists had expected. Rhona O'Connell, an analyst at StoneX, said the plunge made gold more attractive to many investors.

In testimony prepared for a congressional hearing on Tuesday, Mr Powell said the US economy continued to "continue to improve" from the impact of the COVID-19 pandemic and that the job market continued to grow, but that inflation had "risen significantly in recent months".

Gold prices fell sharply last week when the Fed hinted at its latest policy meeting that it would raise interest rates earlier than expected and scale back its asset purchases. However, hawkish Fed officials such as St. Louis Fed Chairman Brad and Dallas Fed Chairman Kaplan made comments on Monday to allay market concerns.

St. Louis Fed President Bullard said that given the more volatile inflationary environment and booming economy, the Fed's methodically curtailed bond-buying program after the last economic crisis could not provide guidance for this action. European Central Bank President Christine Lagarde said on Monday that she refused to compare the United States with the euro zone, which is "clearly in a different position" in terms of inflation prospects. She reiterated the message sent after the ECB's last policy meeting on June 10 that now is not the time to allow interest rates to rise, so the ECB will maintain favourable financing conditions. She added: "the continued rise in market interest rates could translate into a tightening of the broader financing environment relevant to the economy as a whole. Such a tightening is premature and will pose a risk to the ongoing economic recovery and the outlook for inflation. "

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