The price of gold takes a step back after the Fed has spoken

(Kitco News) The price action in the gold market is taking a lull following aggressive comments from Federal Reserve speakers, with prices moving further away from the $ 1,800 an ounce target.
The price of gold jumped to a daily high of $ 1,805 an ounce on Tuesday morning, driven by mounting geopolitical tensions as House Speaker Nancy Pelosi landed in Taiwan amid Chinese threats of “grave consequences” for her visit.
However, gold returned all of its daily gains following the Fed’s aggressive rhetoric, with December Comex gold futures last trading at $ 1,777.10, down $ 10 on the day.
“Gold slashed earnings after Wall Street became optimistic that tensions between the world’s two largest economies would get out of hand,” said Edward Moya, senior analyst at the OANDA producer. “A strong dollar is also weighing on gold as the greenback’s withdrawal over the past two weeks appears to be over.”
Chicago Fed Chairman Charles Evans said Tuesday that the US central bank will likely continue to use oversized rate hikes until inflation falls. Evans added that he doesn’t rule out a 50 basis point hike in September.
“If you really thought things weren’t getting better … 50 (basis points) is a reasonable rating, but 75 might as well be fine. I doubt more would be needed,” he told reporters Tuesday.
San Francisco Fed Chair Mary Daly also spoke on Tuesday, saying that inflation is still an issue. The Fed has “a long way to go” before reaching its price stability targets, especially after the pace of June inflation accelerated to 9.1% from a year ago, Daily said in an interview. on LinkedIn. “We are still steadfast and completely united,” she said.
It all hinges on data going forward, Daly added, echoing Fed Chairman Jerome Powell’s remarks last week. “I’m really looking to see what this data is telling us to see if we can lower the pace of rate hikes a bit, or if we need to continue,” Daly said.
Evans and Daly won’t be voting on members this year, but their comments reveal some behind-the-scenes thoughts.
The aggressive comments come after the US central bank hiked rates by 75 basis points last week for the second consecutive time. At the time, Powell also said the US is not in a recession, meaning another “unusually large” rate hike could be in store in September, followed by a slowdown in tightening.
“I don’t think the US is currently in a recession. There are too many areas of the economy that are doing too well. I would point to the very strong job market. [It is] true that growth is slowing down … [But generally]GDP numbers [are] revised quite significantly. You tend to take early GDP reports with a grain of salt, ā€¯Powell said, referring to the first reading of the second-quarter GDP report.
From a data perspective, the signs point to still problematic inflation numbers and an economic slowdown.
This week, markets are still digesting the Fed’s preferred inflation indicator – the Personal Consumer Spending Price Index – up 6.8%, the most significant annual increase from 6.9% in January. 1982.
In addition, second-quarter US GDP shrank 0.9%, marking the second consecutive quarterly contraction and meeting the technical definition of a recession.
Moving forward, Powell said he wanted to make meeting-by-meeting decisions and move away from providing clear guidance on the exact magnitude of the rate hikes to come. There are two more inflation and job data reports to be released ahead of the September Fed meeting.

24 hour live gold chart [Kitco Inc.]

For gold, a strong US dollar will continue to be an obstacle to rising prices, Moya noted.
“The US dollar has had a strong boost as the Fed’s latest round of statements supports the idea that the interest rate differential will remain broadly in the dollar’s favor,” he said. “Geopolitical jitters may also attract safe-haven flows mainly into Treasuries and this will support the dollar. Gold is looking to be a safe haven again and this latest round of international outlook risks will allow us to learn quickly if it becomes. . ”
For gold to see a noticeable change in trend and a sustainable bullish rally, the precious metal must be trading well above the $ 1,800 per ounce level, according to TD Securities strategists.
“The risk aversion tone prevailing in the market linked to US-China relations has further supported the yellow metal through modest shelter flows,” they said Tuesday. “However, for further significant short coverage from CTA trend followers to take place, gold prices would need to close north of $ 1,820 / oz to trigger a shift in trend signals … Let’s see the risks that the speakers of the Fed may reject market expectations for a first Fed Pivot. In this sense, gold markets are faced with a huge amount of complacent length held by prop traders, who still hold the dominant speculative force stock on the market. ‘gold”.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article disclaim any liability for loss and / or damage resulting from the use of this publication.

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