5 min readWhat to expect from Powell at the Jackson Hole Symposium
Gold prices are rising towards $2500, recovering from yesterday’s losses. Investors remain focused on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole economic symposium later today.
What is the Jackson Hole Symposium? It is an annual gathering of central bankers, economists, and policymakers from around the world who come together to discuss the most pressing global economic issues.
What to expect from Powell at the Jackson Hole Symposium?
Federal Reserve chair Jerome Powell’s keynote speech is on Friday at 10 am ET and has been keenly awaited by investors amid expectations that he could provide more clues about the timing, size, and pace of rate cuts. Fed chair Jerome Powell speaks as the market expects the central bank to start lowering borrowing costs from a more than two-decade high next month.
As policymakers become more confident that inflation is cooling to the Fed’s 2% target, the market will also be watching closely for further insights into the health of the labour market as the Fed shifts its gaze to the employment component of the central bank’s dual mandate.
Powell’s speech comes after data earlier this week showed that US payrolls were downwardly revised by a significant 818k, showing that the U.S. jobs market is weaker than initially reported. Investors will be watching to see if Fed Powell makes reference to this downward revision.
The markets are pricing in a 25 basis point rate cut by the Fed in the September 17 to 18 meeting and see almost 1% worth of rate reductions by the end of the year. This may be considered quite an aggressive pace of rate cuts. Federal Reserve chair Powell is expected to support a slower, more methodical approach to reducing rates but could adopt a more broad brush approach to the speech.
How could Gold react to Fed Powell’s speech?
Yesterday, gold prices fell as the markets wobbled ahead of today’s speech, and investors questioned whether 1% worth of interest rate cuts this year was indeed possible.
Still, the markets have shrugged off those worries today. The US dollar fell lower once again tracking treasury yields lower.
Gold is U.S. dollar-denominated and non-yielding; it performs better in low-interest rate environments and when the USD falls.
Given that the market is already fully pricing in a September rate cut by the Fed and aggressive rate cuts across the rest of the year, Powell could disappoint if he keeps comments broad-brush and reiterates data dependence. In this scenario, it could be a case of buy the rumor, sell the fact.
Gold price forecast: Could Gold reach $3000?
Looking ahead, gold prices remain supported by expectations that central banks across the globe, including the Federal Reserve, will start cutting interest rates this year and continue well into next year. The low interest rate environment, as well as persistent central bank buying, particularly from the PBoC and the ongoing war in Ukraine and the Middle East, could help Gold rise towards $3000 in 2025.
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