Gold declined again on Friday in the wake of Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole economic symposium in Wyoming, where he warned against any idea that the US central bank would start loosening monetary policy soon.
Spot gold fell 1.2% to $1,736.93 per ounce by noon ET, erasing its gains for the week. US gold futures were down 1.3% to $1,749.10 per ounce in New York.
[Click here for an interactive chart of gold prices]
Gold’s decline comes after Powell signalled that the US central bank will likely keep raising interest rates and leave them elevated for a while to contain high inflation.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said on Friday at the Kansas City Fed’s annual policy forum. “The historical record cautions strongly against prematurely loosening policy.”
“There is no waffling in Powell’s speech — high rates will be here for some time. The only question now is will September be 50 bps or 75 bps,” said Tai Wong, a senior trader at Heraeus Precious Metals, in a Bloomberg interview. “Gold will fluctuate based on rate-hike expectations, perhaps in the $1,680-$1,820 range in the near future.”
“Powell’s statements were quite hawkish and since there was no dovish pivot, gold will continue to face pressure as it will have to deal with higher interest rates,” Philip Streible, chief market strategist at Blue Line Futures in Chicago, told Reuters.
“Gold needs to capture $1,800 in order to gain its momentum, otherwise $1,740s is key level support,” Streible added.
Prior to Powell’s speech, investors saw the odds of a half-point or another three-quarter point hike at the Fed’s September 20-21 gathering as roughly even. They remained in that vicinity after he spoke, but the amount of reductions in fed rates priced for 2023 briefly retreated.
The Fed chair said that the central bank’s decision at the September meeting “will depend on the totality of the incoming data and the evolving outlook.”
(With files from Bloomberg and Reuters)