Gold Holds Near $4,600 Ahead of Warsh Speech
Gold prices rose on Thursday, moving back toward the $4,650 per ounce level as investors assessed the Federal Reserve’s approach to persistent inflation ahead of Fed Chair Kevin Warsh’s highly anticipated speech at the Jackson Hole symposium.
At 08:45, XAU/USD was up 0.7% at $4,625.83 per ounce, while Gold Futures gained 0.6% to $4,680.50. XAG/USD climbed 1.9% to $69.41 per ounce, while XPT/USD advanced 1% to $1,854.30. The US Dollar Index was little changed at 99.12.
Sticky Inflation Supports the Dollar and Treasury Yields
Gold declined 1.4% on Wednesday, ending a five-session winning streak after the latest US inflation data showed that price pressures remain well above the Federal Reserve’s 2% target.
The data pushed the US dollar higher and lifted US Treasury yields, two developments that typically weigh on gold because the precious metal does not generate interest and is priced in US dollars.
The Personal Consumption Expenditures (PCE) Price Index rose 3.7% year over year in July, unchanged from June and slightly above economists’ forecast of 3.6%.
Markets responded by modestly increasing expectations for a September rate hike. The probability of at least a 25-basis-point increase has risen to around 40%, compared with approximately 36% before the inflation data was released. Traders also continue to anticipate higher interest rates by the end of the year.
ANZ analysts said the downside for gold could remain limited as ongoing debasement trade continues to attract buyers.
The latest inflation figures also came alongside signs of resilience in the broader US economy. Second-quarter GDP growth remained unchanged at 1.5%, personal income increased 0.4% in July, while consumer spending was flat.
Warsh Speech Becomes the Next Key Test
Attention now turns to Warsh’s Jackson Hole speech on Friday, his first major address as Federal Reserve Chair. Investors will be watching closely for clues about how he plans to respond to inflation that has remained above the Fed’s 2% target for an extended period.
Warsh faces pressure to provide greater clarity after moving away from traditional forward guidance since taking office. Investors also want him to address the interaction between monetary policy and the bond market, particularly after the US Treasury doubled its planned purchases of longer-dated government debt.
ANZ noted that recent Treasury measures and growing concerns over fiscal policy have helped sustain the debasement trade. In simple terms, investors are buying gold as a hedge against the risk that persistent deficits, heavy borrowing, and policies designed to contain long-term yields could weaken the purchasing power of the US dollar.
This theme has provided a counterbalance to the interest-rate pressures created by persistent inflation. Gold remains around 14% higher this month despite Wednesday’s pullback, following renewed momentum from Treasury intervention.
The precious metal also remains above its 200-day moving average, a widely watched indicator of long-term market momentum.
Meanwhile, gold-backed ETFs have recorded strong inflows during the latest rally, while continued central-bank demand and concerns over the sustainability of US fiscal policy are supporting the long-term outlook for gold.
