(Kitco News) All eyes are on Federal Reserve Chairman Jerome Powell’s Jackson Hole speech Friday morning with golden bulls betting on more central bank patience when it comes to the expected reduced ad.
Investors are still on the verge of whether or not Powell could reveal a reduced plan at the Jack Hole symposium, which is being held virtually this year. However, the publication of the most prudent minutes of the July FOMC meeting has changed the reduced timeline at the end of the year.
“Everything has been very quiet in the markets, which is not surprising in the circumstances. The combination of light news feeds, few economic publications and precaution before the Jackson Hole event has taken all the excitement out of the markets. Instead of this, it has been replaced by a nervous expectation as we wait to see what the Fed will do next, ”said Craig Erlam, senior market analyst at OANDA. Markets are unlikely to get more clarity on the Fed’s reduction in its $ 120 billion monthly bond spending on Friday. In light of the slightly disappointing macro data and the rapidly expanding delta variant, Powell is more likely to opt for caution, Erlam added.
“I wouldn’t be surprised if this turns out to be a big anticlimax, with Powell saying very little note and insisting that the data will dictate any decision at upcoming meetings. In other words, the president can just hit the can by the road and buy the central bank a few more weeks, ”he said on Tuesday.
TD Securities strategists also don’t expect any breaking news when it comes to downsizing.
“We expect the presidency’s speech to echo the latest minutes of the July meeting, suggesting that the QE reduction is likely to be at the end of the year, but we do not expect a September announcement.” the strategists on a note.
No clear announcement would be good news for gold, which has been sitting at around $ 1,800 an ounce, waiting to make a move one way or another.
OANDA senior market analyst Edward Moya noted that Powell’s speech would be key to the gold market.
“Friday will be a turning point for the golden oxen, but the publication of the last political meeting suggests that Powell will likely avoid any firm commitment on when to reduce the reduction, but confirms that it will be announced before the end of the year, “he said. “The $ 1,850 level is all for gold and if after the Jackson Hole Symposium, prices can’t reach a new high in August, bullion investors could be on the sidelines.”
Until Friday, at 10 a.m. ET time, when Powell is scheduled to speak, gold is likely to continue trading sideways, Commerzbank analyst Daniel Briesemann said.
“Few market participants seem willing to make firm commitments before President Fed Powell’s speech is delivered on Friday. It is unlikely that it will be long before his speech … The US dollar has had a considerable influence on the price of gold in recent weeks, “Briesemann said.
However, some analysts do not rule out a new hawk sentiment emerging from Powell’s speech.
“In order to maintain this proposed timeline, President Powell should make it clear that debates remain limited even as new data suggest progress in fulfilling his dual mandate,” said Win Thin, global head of BBH Global Currency Strategy. “Our current call is for an explicit reduction announcement at the September FOMC, which will cut $ 20 billion in UST and $ 10 billion in MBS at each meeting starting November 3 and ending in March 2022 .If the economy continues to grow as the Fed expects, then this would allow a waiting period of 6-9 months before the exit of the fourth quarter of 2022. “
The Jackson Hole Symposium officially begins Thursday and ends Saturday. This year’s theme is “Macroeconomic policy in an unequal economy.”
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