The gold price was on a bearish path on Friday. Investors focused largely on the Jackson Hole symposium for clues on the Federal Reserve’s monetary policy stance to reduce inflation. Analysts interpret the market and share their forecasts.
“We are likely to see a new downside move for the gold price”
Spot gold was trading at $1,746, down 0.70% at the time of writing. U.S. gold futures fell 0.76% to $1,757.8. However, intermittent declines in a durable dollar have put the dollar-priced bullion on track for weekly gains. Meanwhile, the dollar index (DXY) is hovering near one-month highs. Indicator US 10-year Treasury rates strengthened. Harshal Barot, senior research consultant at Metals Focus, South Asia, comments:
If the Fed reiterates the fact that inflation is the number one priority and will continue to rise until inflation is officially under control, that is, if it continues to hawk, we’re likely to see a new downside move for gold.
“This situation will be good for the gold price”
cryptocoin.com As you follow, Fed Chairman Jerome Powell will deliver his speech at the Jackson Hole symposium in Wyoming today. Investors will look for any clues as to how aggressively the Fed will continue to tighten monetary policy. It will also closely monitor indicators of a potential change in strategy in the event of an economic slowdown.
Gold is considered a safe investment during times of economic fluctuation. However, increases in interest rates increase the opportunity cost of holding non-yielding bullion. Stephen Innes, managing partner of SPI Asset Management, comments:
I think Powell will imply that lowering inflation will likely require a bargain. In other words, we will have to take an economic blow. That will be good for gold too.
“There is still upside potential for yellow metal”
Fed officials on Thursday said they would raise rates and keep them there until inflation subsides. Interest rate futures are now priced at 60% for a 75 basis point hike in September. Kitco Metals senior analyst Jim Wyckoff explains his views on the subject as follows:
Gold sees a corrective bounce from recent selling pressure. The dollar retreated from its highs. Also, there’s some positioning ahead of Powell’s speech. In the near term, gold charts are still bearish. But in the long run, there will be some safe-haven demand whenever the economy falters. Therefore, there is still upside potential for the gold price.
“Traders do not trust the concept of ‘Fed pivot’”
Meanwhile, DXY fell 0.2%, making gold cheaper for offshore buyers. Analysts say the modest decline in the dollar and the decline in long-term Treasury yields from their recent highs helped gold offset losses. Investors are also considering data showing that the US economy contracted in the second quarter at a more moderate pace than initially thought.
In a research note Thursday, TD Securities analysts wrote in a research note that precious metals traders do not trust the concept of a “Fed pivot,” the idea that the Fed’s rate hikes will soon slow the pace. In this context, analysts make the following assessment:
Facing the most hawkish central bank regime since the 1980s, the entire precious metals complex is currently trading in a bear market regime despite rising recession risks.
“Powell’s attitude will be decisive for the gold price”
An analyst at Sevens Report Research commented in Thursday’s news release:
If the market reacts like a dove to Powell, that will push inflation expectations even higher. If the dollar and interest rates retreat in this environment, this will cause a tailwind on gold. However, a hawkish and “growth-insensitive” Powell will likely send gold back to $1,700 by Friday’s close.
