How will the gold price respond to Jerome Powell’s speech in Jackson Hole? The trend will depend on what exactly the Fed Chair will say. Will markets estimate his tone as hawkish or not hawkish enough? Let’s discuss it and make a trading plan.
Fundament gold forecast today
The conference in Jackson Hole is an important time for gold, as its price is quite responsive to the Fed’s monetary policy. The drama may end with a storm of applause or with a total failure. The XAUUSD price moves ahead of Jerome Powell’s speech doesn’t suggest that the negative has already been priced; the gold price will surely react to the Fed’s hawkish stance. The price could jump in both directions, and we shall watch the moves.
Invesco believes that the Fed is successfully coping with inflation expectations, so there is no reason to change the formula. The aggressive hawkish tone in Jackson Hole in August will not stop the central bank from slowing down monetary tightening at its September 21 meeting. However, there is a pretty long time between these two events, and there are upcoming important data releases, including reports on employment and inflation. No matter how the market initially reacts to Jerome Powell’s speech, adjustments are likely in the future.
On the contrary, Allianz SE claims that the Fed remained passive for too long. Now, the US central bank should act decisively and convince markets of continuous monetary tightening. The Fed faces two controversial tasks simultaneously. It should press down inflation and avert serious damage to the US economy. TD Securities shares the same opinion. The company claims the markets expect Jerome Powell to express unhappiness with the loosening of the financial conditions in the US. In this scenario, there won’t be any hope for the Fed’s dovish shift, which will strengthen the US dollar and weaken commodities, including gold.
Dynamics of gold and US dollar
Some analysts suggest opposite scenarios. Goldman Sachs predicts the Fed chairman at Jackson Hole will lay out the case for a slower monetary tightening. Heraeus Precious Metals believes the market has already priced in a hawkish Powell, so stocks, bonds, and gold could well be rising.
So investors have completely different opinions on where the gold price will end up following the conference in Jackson Hole.
Jerome Powell faces an extremely tough task. If he sounds too hawkish, suggesting further aggressive rate hikes, Treasury yields and the US dollar, following a short-term rise, will be falling amid the recession risks. Otherwise, without saying anything new, the Fed could trigger the rally in stocks, bonds and gold, hindering the work on bringing inflation back to its 2% target.
Gold trading plan today
If Powell stresses that the federal funds rate reaches 4% and will remain at this level for a long time, the USD index and Treasury yields rally will continue. In this scenario, the gold price will be down. If the price drop below $1750 and $1743, it will be relevant to sell.
Price chart of XAUUSD in real time mode
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