Tomorrow, traders and investors will gain more clarity and knowledge as President Jerome Powell speaks virtually at the Jackson Hole Economic Symposium. As of 6:01 PM EST, December 2021’s most active Comex contract is set at $ 1794.50, about $ 0.70 below the effective close in New York, as gold is traded in Australia . In New York, gold was trading at an intraday low of $ 1781.30 and a high of $ 1800.40.
Traders expect to get information from President Powell regarding the timeline for reducing his asset purchases by $ 120 billion a month. The Federal Reserve currently spends $ 80 billion a month on U.S. Treasury and $ 40 billion a month on mortgage-backed securities (MBS). The question is whether or not President Powell indicates a timeline or a beginning of volume reduction and whether he is tempering the hawkish tone contained in the recently published minutes of last month’s FOMC meeting.
The less accommodating tone that emerged from the last FOMC meeting was based on good economic growth in the United States, along with the strong employment figures from the latest job report. The latest Department of Labor job report indicated that there were 943,000 additional new jobs added in July. However, they did not take into account the Delta variant, which is captivating parts of the United States. This is because the Covid-19 Delta variant was not as problematic as it is now.
Gold and silver are likely to react based on what President Powell says and how his statements reflect the strength or weakness of the dollar, as well as U.S. debt yields. If, as many analysts believe, the Federal Reserve is forced to take a step back because of the effect the Delta variant is having on economic growth, it would be an extremely bullish factor for gold and silver.
President Powell mentioned during his last speech that each subsequent wave of Covid-19 infections seems to have less of an impact on the economy. Recent data indicate strong GDP growth and a report showed second-quarter GDP rose to 6.6% since its initial reading of 6.5%.
These recent key events showing real growth and the potential for a real economic slowdown due to the Delta variant are two opposing forces, something the Fed will have to look at. Traders will also look to him to tackle extremely hot inflation. The Federal Reserve will continue to have a tight line between positive economic data and the potential for the increase in Covid 19 cases to have a real impact on economic recovery. Gold should trade in a narrow range until President Powell speaks tomorrow.
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