Gold Prices Surge Following Powell’s Signals

In a highly anticipated speech at the Jackson Hole Central Bank Symposium, Federal Reserve Chair Jerome Powell indicated that it’s time to adjust monetary policy. He highlighted reduced inflation risks and growing concerns about the labor market. As a result, the gold market experienced significant buying, with December gold futures trading at $2,551.60 per ounce—a more than 1% increase for the day. At the time of writing, the precious metal is trading at $2512 per ounce.

Powell’s comments were described as “undoubtedly” dovish by analysts. While addressing the factors behind the 2022 inflation surge, he expressed optimism that the central bank could manage inflation while supporting economic growth and employment. Market expectations remain high, with a 32% chance of a 50-basis point rate cut in September. However, Powell emphasized that the Fed won’t rush the easing cycle. As markets price in potential rate cuts, the gold market may experience volatility.

Further weakness in the U.S. labour market could prompt a 50 bp rate cut at the September policy meeting. The dovish tone indicates ongoing adjustments in monetary policy. The dollar and US Treasury bond yields dived following dovish remarks by Chair Jerome Powell, who signaled that he’s confident that inflation is edging towards the 2% goal and that rates should be cut.