Gold prices fell on Friday as Federal Reserve Chairman Jerome Powell emphasized the need to bring down inflation in a speech at the Jackson Hole central bankers conference, supporting prospects for higher interest rates.
Price action
- Gold futures GCZ22, -1.21% for December delivery were down $12.50, or 0.7%, to $1,758.80 per ounce. For the week, the most-active contract traded 0.2% lower.
- September silver SIU22, -0.94% traded at $19.11 per ounce, down half a penny.
- Palladium futures PAU22, -1.44% for September were up $26.20, or 1.2%, to $2,166 per ounce, while platinum futures PLU22, -0.86% for October delivery were off $6.80, or 0.8%, to $867.10 per ounce.
- Copper HGU22, +0.09% for September delivery climbed 3 cents, or 0.8%, to $3.729 per pound.
What analysts are saying
In his speech Friday, Powell delivered a blunt message that the Fed will keep working to bring inflation down until it is done and that the fight will cause pain to households and businesses.
Powell is “tilting towards aggressive tightening going forward until inflation is under control,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. “For gold this will send it lower as it cannot compete for risk free capital with a rising yield” for U.S. Treasurys.
A stronger U.S. dollar is a biproduct of rising rates and gold will suffer as well,” he added.
Powell kept the door open for a 0.75 percentage point interest rate hike in September, saying that “another unusually large increase could be appropriate” next month.
“Gold could easily pull back towards $1,700 or below,” said Wright. In the near term there’s not much of a case to step in to buy gold or support this market, he said.
“A restrictive monetary policy is not friendly for gold,” said Wright.
““A restrictive monetary policy is not friendly for gold.””
In Friday dealings, the yield on the 10-year Treasury TMUBMUSD10Y, 3.021% climbed 1.6 basis points to 3.048%, while the the ICE U.S. Dollar Index DXY, -0.03%, a gauge of the greenback’s strength against a basket of rivals, was off 0.4%.
“Gold initially fell hard in all currencies on Powell’s comments, because his commitment to risking recession and job losses to reduce inflation suggests that the rest of the world will also need to accelerate more aggressive rate rises short term,” Adrian Ash, director of research at BullionVault, told MarketWatch.
“But gold had been mirroring the dollar this week ahead of today’s Fed speech, holding firm near the upper-end of its 2022 range in euros, even as it retreated for U.S. investors,” he said. “That firm bid looks to be holding now that Powell’s Jackson Hole speech is done.”
Longer term, Ash was more upbeat on the outlook for gold.
“The threat of recession means the bond market sees rates falling back,” he said. “Together with solid bargain hunting across Asian consumer markets going into Diwali and then Chinese New Year, that suggests a floor for gold sooner than later even in the face of higher Fed rates.”
Data released Friday showed a key gauge of U.S. inflation fell 0.1% in July thanks to tumbling gasoline prices.