Gold edges up despite Powell’s hawkish rates stance
Investors were already priced for the outcome before the Fed president’s speech, which allows room for relief on little surprises, analyst says
28 August 2023 - 07:38
by Swati Verma
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Bengaluru — Gold prices firmed on Monday despite US Federal Reserve chair Jerome Powell’s hawkish stance on interest rates as markets sought direction from economic data this week for confirmation on the rate trajectory.
Spot gold was up 0.1% at $1,916.19 per ounce by 3.54am GMT (5.54am) and US gold futures gained 0.2% to $1,943.90.
Speaking at the annual gathering in Jackson Hole, Wyoming, on Friday, Powell left open the possibility of further rate increases to cool still-too-high inflation and stressed the US economy’s surprising strength.
“The general view is that market participants were already priced for a hawkish outcome in the lead-up to Powell’s speech, which allows room for some relief on little surprises,” said Yeap Jun Rong, a market strategist at IG.
“However, much still awaits on a sustained recovery in gold prices for now, given that concerns of re-accelerating inflation on US economic resilience are translating into mounting bets of a November rate hike.”
Interest rate futures tied to the Fed’s policy rate priced in a more than even chance of tightening at either the November or December policy meetings after Powell’s speech.
Cleveland Federal Reserve Bank president Loretta Mester said on Saturday that beating inflation will probably require one more US interest rate hike and then going on hold for “a while”.
Higher rates translate into lower demand for bullion, which yields no interest.
A series of economic data this week, with the US non-farm payroll report on Friday, is likely to provide a sharper focus on the economy’s strength.
Highlighting investor sentiment towards bullion, data on Friday showed Comex gold speculators cut net long position by 20,845 contracts to 25,695 in the week ended August 22.
Elsewhere, spot silver fell 0.2% to $24.17 and platinum was down 0.1% at $943.64. Palladium added 0.8% to $1,233.74.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Gold edges up despite Powell’s hawkish rates stance
Investors were already priced for the outcome before the Fed president’s speech, which allows room for relief on little surprises, analyst says
Bengaluru — Gold prices firmed on Monday despite US Federal Reserve chair Jerome Powell’s hawkish stance on interest rates as markets sought direction from economic data this week for confirmation on the rate trajectory.
Spot gold was up 0.1% at $1,916.19 per ounce by 3.54am GMT (5.54am) and US gold futures gained 0.2% to $1,943.90.
Speaking at the annual gathering in Jackson Hole, Wyoming, on Friday, Powell left open the possibility of further rate increases to cool still-too-high inflation and stressed the US economy’s surprising strength.
“The general view is that market participants were already priced for a hawkish outcome in the lead-up to Powell’s speech, which allows room for some relief on little surprises,” said Yeap Jun Rong, a market strategist at IG.
“However, much still awaits on a sustained recovery in gold prices for now, given that concerns of re-accelerating inflation on US economic resilience are translating into mounting bets of a November rate hike.”
Interest rate futures tied to the Fed’s policy rate priced in a more than even chance of tightening at either the November or December policy meetings after Powell’s speech.
Cleveland Federal Reserve Bank president Loretta Mester said on Saturday that beating inflation will probably require one more US interest rate hike and then going on hold for “a while”.
Higher rates translate into lower demand for bullion, which yields no interest.
A series of economic data this week, with the US non-farm payroll report on Friday, is likely to provide a sharper focus on the economy’s strength.
Highlighting investor sentiment towards bullion, data on Friday showed Comex gold speculators cut net long position by 20,845 contracts to 25,695 in the week ended August 22.
Elsewhere, spot silver fell 0.2% to $24.17 and platinum was down 0.1% at $943.64. Palladium added 0.8% to $1,233.74.
Reuters
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