Gold Achieves Weekly Gains Amid Anticipation of Interest Rate Cuts
Global markets witnessed a strong upward movement on Friday, August 22, led by gold and Wall Street indices, following the speech delivered by U.S. Federal Reserve Chairman Jerome Powell at the annual Jackson Hole symposium, in which he indicated the "beginning of a path to lower interest rates".
In terms of prices, the spot gold price rose by 1.1% to reach $3,373.89 per ounce, while U.S. gold futures settled at $3,418.50. This rise was supported by a 1% decline in the U.S. dollar, making the precious metal cheaper for holders of other currencies. The upward wave extended to silver, which jumped 2.2% to $39.01, as well as platinum and palladium.
Investors' attention was focused on the Federal Reserve meeting in Wyoming, where Powell provided important signals regarding monetary policy. He stated in his speech: "With monetary policy remaining in a restrictive range, the baseline outlook and changes in the balance of risks may warrant an adjustment to our monetary policy stance".
Not stopping there, he clarified that "the balance of risks seems to be shifting" between the Fed's dual commitment to full employment and price stability, pointing to "fundamental changes" in tax, trade, and immigration policies.
Powell's remarks had an immediate impact on market expectations, as the likelihood of a 25 basis point rate cut at the September meeting increased from 75% before the speech to 85% after it, according to the CME FedWatch tool. Upcoming Fed statements are expected to focus on job and inflation data to be released before the September meeting.
In a related context, U.S. data showed that "unemployment claims rose last week at the fastest pace in nearly three months", reflecting continued weakness in the labor market. On the other hand, actual demand for gold in Asia remained weak due to price volatility, while jewelers in India resumed buying ahead of the festival season.
On the political front, U.S. President Donald Trump intensified his efforts to gain influence over the central bank, stating that he "would fire Lisa Cook, a Federal Reserve governor, if she does not resign". In global news, "Reuters" reported from three informed sources that Russian President Vladimir Putin is demanding that Ukraine cede the entire Donbas region and abandon its efforts to join NATO.
It is worth noting that gold, which does not provide any yield, typically performs well in a low-interest-rate environment, becoming more attractive compared to interest-bearing assets.
