In response to U.S. Federal Reserve Chair Jerome Powell’s recent commentary regarding the possibility of further interest rate hikes, gold prices exhibited a degree of steadiness on Monday. The market’s attention shifted towards forthcoming economic data releases, which are expected to provide clarity on the trajectory of interest rates.
At 0744 GMT, spot gold remained virtually unchanged at $1,914.99 per ounce. This came as the U.S. dollar index maintained proximity to a 12-week peak. Concurrently, U.S. gold futures experienced a modest 0.1% increase, reaching $1,942.40. [USD/]
Powell’s speech at the annual event in Jackson Hole, Wyoming, delivered on Friday, retained the possibility of additional rate hikes as a measure to temper persistent inflation and underscored the unforeseen strength of the U.S. economy.
Yeap Jun Rong, an IG market strategist, remarked, “The prevailing sentiment is that leading up to Powell’s address, market participants had already factored in a hawkish outcome, allowing some room for relief amid minimal surprises.”
Rong added, “However, the trajectory of gold prices is contingent on a sustained recovery at this point. The concerns of resurging inflation due to the resilience of the U.S. economy are contributing to an increasing likelihood of a November rate hike.”
Loretta Mester, of the Cleveland Federal Reserve Bank, stated on Saturday that tackling inflation would likely necessitate another U.S. rate hike. The prospect of elevated rates translates to diminished demand for bullion, a non-yielding asset.
Tim Waterer, Chief Market Analyst at KCM Trade, noted, “Although Powell’s statements didn’t augment the momentum of Treasury yields, they remain historically high, continuing to exert downward pressure on the gold price.” [US/]
The week ahead is anticipated to bring a slew of economic indicators, notably the U.S. core PCE inflation and non-farm payroll report. These data points are poised to provide greater clarity regarding the robustness of the economy.
As an indicator of investor sentiment towards bullion, recent data revealed that COMEX gold speculators reduced their net long positions in the week concluding on August 22. [CFTC/]
In parallel, spot silver experienced a 0.4% decline, settling at $24.14, while platinum saw a slight 0.2% easing to $943.12. Palladium made a modest gain of 0.1%, reaching $1,222.86.
Investors and market observers now eagerly await the economic releases this week, looking to glean insights into the underlying strength of the economy and how it might impact the ongoing speculation about interest rates and their subsequent effects on precious metal markets.
