Federal Reserve Chairman Jerome Powell spoke virtually at the economic symposium, an annual event hosted by the Kansas City Fed. Traders and market participants have been waiting for his speech to delve into the current sentiment of the Federal Reserve with regard to its very accommodative monetary policy. The tone of his prepared statements was interpreted as more obvious than last month’s FOMC meeting.
Towards the end of his prepared speech, President Powell said: “This brings me to a final word on the way forward for monetary policy. The Committee stands firm in our ever-expressed commitment to supporting the “save the time it takes to achieve a full recovery. The changes we made last year in our Declaration on Longer-Term Goals and monetary policy strategy are appropriate to meet today’s challenges.”
The net effect on US equities and precious metals was a strong upward movement of both asset classes. The NASDAQ compound closed at a new record gaining 183 points and closing at 15,129,5011. The same goes for the S&P 500, which gained 39.37 points (+ 0.88%) and closed at an all-time high of 4509.37. Although the Dow Jones industrial average gained 242.68 points, a net gain of + 0.69%, it did not break the record high set in early August.
The gold base, the most active Comex contract in December 2021, had a significant gain of 1.41%, a total of $ 25.30 and closed above the key psychological level of $ 1800 for ounce. Gold closed the week at $ 1820.50, just above the intraday high reached at $ 1821.90. Powell’s words contained the right tone and timbre to satisfy investors and market participants.
President Powell’s speech has had two main points to take away today. The first is that the Federal Reserve still considers the recent rises in inflation to be transitory. The second major drawback was that while he said they are not far from reducing their monthly purchases of $ 120 billion in assets, he made a big distinction between the beginning of the reduction in time and the chronology of the the emergence of interest rate hikes.
The distinction between the timeline for declining and the timeline for raising rates was made very clear when President Powell said that “The timing and pace of the next downturn in asset purchases will not be intended. to give a direct signal on the timing of the withdrawal of the interest rate, for which we have articulated a different and substantially more rigorous test.We have said that we will continue to keep the target range of the federal funds rate at its current level until the economy has reached conditions consistent with maximum employment and inflation has reached 2% and is on track to moderately exceed 2% for some time.We have a lot of ground to cover to reach maximum employment and the time will tell if we have reached 2% inflation in a sustainable way ”.
His speech paved the way for gold and silver prices to gain substantial gains in the coming weeks. The next set of important data that market participants will focus on will be U.S. Department of Labor job reports for the month of August. This will be the key report that Federal Reserve members will consider when convened at the September FOMC meeting.
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