Gold Holds Steady Ahead of Key Jackson Hole Speech
Gold prices remained largely unchanged on Thursday as investors positioned themselves ahead of a highly anticipated speech from Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium later this week.
As of 16:30 WIB, spot gold (XAU/USD) edged up 0.1% to $4,597.39 per troy ounce, while gold futures slipped 0.1% to $4,649.64 per troy ounce.
The precious metal is on track for a weekly gain of more than 1%, supported by growing expectations that the Federal Reserve could leave interest rates unchanged at its September meeting rather than raise borrowing costs to combat energy-driven inflation.
Gold Supported by Fed Rate Pause Expectations
Gold has found support from signs that policymakers may adopt a more cautious approach toward monetary tightening. While inflation remains elevated, investors increasingly believe the Fed may choose to hold rates steady in September before reassessing economic conditions later in the year.
Meanwhile, oil prices have declined over recent sessions amid hopes for a diplomatic breakthrough in the Middle East that could lead to the reopening of the Strait of Hormuz. However, the Fed’s preferred inflation gauge continues to indicate persistent price pressures, highlighting the challenges facing policymakers.
Market analysts note that even if the Fed keeps rates unchanged next month, traders still expect additional rate hikes in the coming months. Higher interest rates are generally used to cool inflation but can also slow economic growth.
For gold, a prolonged period of elevated interest rates can reduce its appeal because bullion does not generate yield, increasing the opportunity cost of holding the metal compared with interest-bearing assets.
According to David Morrison, Senior Market Analyst at Trade Nation, gold has also developed a strong inverse relationship with the US dollar. A stronger dollar typically makes gold more expensive for international buyers, limiting demand and weighing on prices.
Warsh Speech in Focus at Jackson Hole
Investor attention is now firmly focused on Warsh’s speech at the Federal Reserve’s Jackson Hole symposium on Friday.
While markets are eager for clues about the future path of US interest rates, Warsh has repeatedly indicated that he does not intend to provide the kind of detailed forward guidance offered by some of his predecessors. As a result, investors will closely analyze his comments for subtle signals regarding inflation, monetary policy, and economic growth.
Market participants are also expected to watch for any discussion about the relationship between monetary policy and the US government bond market. Interest in this topic has increased after the US Treasury recently doubled its planned buybacks of long-term government debt in an effort to ease volatility in bond markets.
ANZ analysts said the Treasury’s latest actions, combined with growing concerns over US fiscal policy, have helped sustain what is known as the “debasement trade.” This strategy involves investors buying gold as a hedge against the risk that persistent budget deficits, rising government debt, and policies aimed at suppressing long-term yields could weaken the purchasing power of the US dollar.
Treasury intervention has provided a counterbalance to concerns that higher interest rates could pressure gold prices. Despite some profit-taking this week, gold has continued to post strong gains throughout August, reflecting resilient investor demand and ongoing uncertainty surrounding the outlook for US monetary and fiscal policy.