Despite U.S. Federal Reserve Chair Jerome Powell’s hawkish stance on interest rates, gold prices rose on Monday as traders looked to this week’s economic data for guidance on the rate trajectory.
By 0354 GMT, spot gold had increased 0.1% to $1,916.19 an ounce, while U.S. gold futures had increased 0.2% to $1,943.90.
Speaking on Friday at the annual conference in Jackson Hole, Wyoming, Powell emphasised the surprise strength of the American economy while leaving open the possibility of additional rate increases to curb the still-too-high inflation.
Market strategist at IG Yeap Jun Rong stated, “The overall perception is that market players were already priced for a hawkish conclusion in the lead-up to Powell’s speech, which gives potential for some relief on modest shocks.
However, given that worries over re-accelerating inflation and the strength of the U.S. economy are leading to rising odds of a rate hike in November, much remains to be seen in terms of a sustainable recovery in gold prices for the time being.
Following Powell’s speech, interest rate futures linked to the Fed’s policy rate were priced in with a more than even likelihood of tightening at either the November or December policy meetings.
On Saturday, Cleveland Federal Reserve Bank Loretta Mester stated that controlling inflation will likely take one more increase in the federal funds rate before remaining on hold for “a while.”
Lower demand for bullion, which pays no interest, results from higher rates.
The U.S. non-farm payroll report on Friday will probably put a deeper focus on the health of the economy after a flurry of economic data this week.
Data released on Friday revealed that COMEX gold speculators reduced their net long position by 20,845 contracts to 25,695 in the week ending August 22, underscoring investor attitude towards bullion.
Spot silver decreased 0.2% to $24.17 and platinum decreased 0.1% to $943.64 in other markets. To $1,233.74, palladium increased by 0.8%.