Gold prices remained resilient on Thursday as investors turned their attention to Federal Reserve Chair Kevin Warsh’s upcoming Jackson Hole speech for fresh clues on the direction of US monetary policy.
By 05:30 ET, spot gold had edged 0.1% higher to $4,597.39 an ounce, while gold futures eased 0.1% to $4,649.64 an ounce.
Bullion remains on track to gain more than 1% over the week, supported by expectations that the Federal Reserve could keep interest rates unchanged at its September meeting rather than immediately tighten policy in response to energy-related inflation pressures.
The recent retreat in oil prices has provided some relief on the inflation front, with investors increasingly hopeful that diplomatic progress in the Middle East could eventually lead to the reopening of the Strait of Hormuz. Nevertheless, the Fed’s preferred inflation gauge continues to indicate persistent price pressures.
Even if policymakers leave rates unchanged in September, markets continue to anticipate the possibility of increases later in the year. Higher borrowing costs can help contain inflation but may also moderate broader economic activity.
For gold, elevated interest rates traditionally represent a headwind because the metal generates no income, making interest-bearing assets comparatively more attractive.
David Morrison, Senior Market Analyst at Trade Nation, said gold has developed a “strong inverse relationship” with the U.S. dollar. Strength in the greenback can make bullion more expensive for international buyers and potentially limit demand.
Jackson Hole takes centre stage
Friday’s Jackson Hole address from Warsh is now the main event for precious metals investors, marking his first major speech since becoming Federal Reserve chair.
Markets will be looking for greater clarity on how the central bank intends to tackle inflation after price growth remained above its 2% target for an extended period.
Investors are also seeking more detail on Warsh’s approach to monetary policy communication after his move away from conventional forward guidance.
Another key area of interest will be the relationship between Federal Reserve policy and the bond market, particularly after the US Treasury doubled its planned purchases of longer-dated debt.
ANZ said the Treasury’s recent intervention, together with concerns about the broader US fiscal outlook, has continued to support the debasement trade.
The strategy reflects investor demand for assets such as gold as protection against the possibility that persistent fiscal deficits, rising government borrowing and attempts to manage long-term yields could gradually erode the dollar’s purchasing power.
That demand has provided a counterbalance to pressure from expectations of higher interest rates. Gold remains around 14% higher this month despite Wednesday’s pullback, with concerns surrounding US fiscal policy helping maintain positive momentum.
Bullion also continues to trade above its 200-day moving average, a widely followed technical indicator that points to continued strength in the longer-term trend.
Meanwhile, gold-backed ETFs have attracted substantial inflows during the latest advance. Continued purchases by central banks and concerns surrounding the sustainability of US government finances are also providing support for the metal’s longer-term investment case.
Leave a Reply