The dollar, in which gold is priced, gained against a basket of currencies during the testimony, making gold more expensive for non-US investors. "The dollar is really reacting to this 'goldilocks' effect of the economy and a slowly rising interest rate environment. That is usually a recipe for a stronger dollar," said David Meger, director of metals trading at High Ridge Futures in Chicago.
Higher interest rates make gold more expensive to own since bullion does not earn any interest or dividends, and costs money to store and insure. Spot gold was 1.1 percent lower at $1,226.91 per ounce by 1:36 p.m. EDT (1736 GMT), having earlier hit its lowest since last July at $1,225.58. The metal is down more than 5 percent for the year.
US gold futures for August delivery settled down $12.40, or 1 percent, at $1,227.30 per ounce. The International Monetary Fund warned on Monday that escalating trade tensions following US tariff actions threaten to depress medium-term growth prospects.
The comments came as China reported slower second quarter growth, though Beijing said that would not affect its 2018 growth target. UBS economists lowered their estimates for Chinese growth to take into account trade war escalation. "If China is slowing down, there will be consequences to global commodity consumption and that's going to drag gold down as well," said Richard Xu, a fund manager at China's biggest gold exchange-traded fund, HuaAn Gold.
Spot gold could break support levels at $1,220 and the psychologically-important $1,200, said Josh Graves of RJO Futures. Silver fell 0.9 percent to $15.60 an ounce, dipping to $15.51, its lowest since July 2017. Platinum fell 1.2 percent to $812 an ounce, hitting a two-week low at $808.89. Palladium fell 0.4 percent to $913.50 per ounce, sliding to $905.05, its lowest since April 9.