Investors focus on Powell’s comments, which put gold back in rally mode

Today, gold futures are trading strongly as market participants react to President Jerome Powell’s speech at the Hutchings Center for Fiscal and Monetary Policy at the Brookings Institution in Washington. Market participants paid close attention to his remarks that referred to a dynamic shift in the Federal Reserve’s monetary policy.

“Thus, it makes sense to moderate the pace of our rate hikes as we approach the level of tapering that will be sufficient to bring down inflation… The time to moderate the pace of rate hikes may come as soon as the December meeting.”

However, it should be noted that the reaction from investors generally seems to have focused on what they expected to hear, which is that the Fed will start raising rates at a slower pace, rather than the more nuanced message that the Federal Reserve needs time. it will take much longer to achieve their goal.

“Restoring price stability is likely to require keeping policy at restrictive levels for some time. . . . History strongly warns against premature policy unwinding. We will stay the course until the job is done.”

As of 18:16, the Comex contract for the most active February 2023 gold futures is settled at $1,784.60, after taking into account today’s double-digit advance on dollar weakness, along with market buyers for the December-to-February contract. the month

Chairman Powell’s speech today eased investors’ worries as they reacted to other members of the Federal Reserve who have been very vocal about upcoming interest rate hikes. Specifically, James Bullard’s recent remarks underscored the Federal Reserve’s darkest intentions. He commented last week that the Federal Reserve’s benchmark rate should rise to 7% to combat inflation. He said this week that “the Federal Reserve will likely need to keep its benchmark policy rate north of 5% through most of 2023 and into 2024 to bring inflation under control.”

Chairman Powell’s remarks were in no way inconsistent with those made earlier in the prepared speech by James Bullard and other members of the Federal Reserve. However, the president was able to deliver that message in a much softer tone. Chairman Powell essentially fixed a 50 basis point rate hike at the December FOMC meeting. However, he stressed that slowing the pace of rate hikes will require the Fed to maintain its tight monetary policy for a longer period of time.

Gold’s recent rally from $1621 to just below $1800 is a reflection of a major shift in investor market sentiment. It suggests that investors are focusing more on inflation and that bringing down inflation to restore price stability will be a multi-year process.

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