Gold prices treading water as Powell provides little guidance on monetary policy during Jackson Hole speech
The gold market continues to tread water below $1,950 an ounce as it finds little direction from the latest comments from Federal Reserve Chair Jerome Powell.
Friday, Powell provided little new information on the central bank's monetary policy, saying that the Federal Reserve will remain cautious as it focuses on bringing inflation back to its 2% target. The comments were made during the annual central bank retreat at Jackson Hole, Wyoming.
Powell said that while the central bank can continue to raise interest rates if inflation remains stubbornly elevated, he added that monetary policy will remain data-dependent.
"As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data," he said.
The gold market is not seeing much reaction to the comments. December gold futures last traded at $1,947.10 an ounce, unchanged on the day.
Adam Button, head of currency strategy at Forexlive.com, described Powell's comments as "a bit of a dud."
"These are all the same things that he said after the last FOMC, and they echo what most other Fed officials have said. Perhaps the market is keying on the 'carefully' comment, which might be seen as dovish. The dollar kicked lower initially, but I just don't see that continuing based on the headlines," he said.
However, Jim Wyckoff, senior technical analyst at Kitco.com, said that he said Powell struck a more hawkish tone as he focused on the central bank's inflation target.
"Twelve-month core inflation is still elevated, and there is substantial further ground to cover to get back to price stability," said Powell in his remarks. "Two percent is and will remain our inflation target. We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time. It is challenging, of course, to know in real-time when such a stance has been achieved."
Powell also noted that the central bank still expects to see weaker economic growth as it cools the economy to bring consumer prices back down to target.
"Getting inflation sustainably back down to 2 percent is expected to require a period of below-trend economic growth as well as some softening in labor market conditions.
Marc Chandler, managing director at Bannockburn Global Forex, said that Powell didn’t cover any new ground; however, he added that markets are still pricing in a rate hike in November.
“Powell spent a little more than 10 minutes summarizing what has taken place in the past year, with little forward guidance,” he said.
By
Neils Christensen
For Kitco News
David