Gold Bounces Back After Dovish Powell Speech

On Thursday, gold prices rebounded after Federal Reserve Chair Jerome Powell emphasized the need for monetary tightening to combat inflation.

Gold futures for December delivery rose by 0.30% to $1,963.65 per troy ounce on November 09. However, analysts anticipate a retreat of 0.40% to $1,961.60 per troy ounce in the upcoming market session.

In contrast, auto-catalyst palladium shed 5.95% to $997.28 per troy ounce. The reading marked the first time the metal commodity fell below the $1,000.00 resistance level.

As for the other metal commodities, silver advanced by 0.78% to $22.91 per troy ounce. On the other hand, platinum declined by 0.83% to $864.30 per troy ounce.

Powell spoke to an International Monetary Fund (IMF) audience in Washington, DC, over a week after the Federal Open Market Committee (FOMC) decision. Despite their choice to hold rates, he expressed doubts about slowing the pace of inflation without more rate hikes.

As of September, the US consumer price index (CPI) stood at 3.70%, unchanged from the previous month. The figure pointed to the second consecutive month that prices rose more than expected.

Nevertheless, Powell said policymakers are determined to bring the CPI down to their 2.00% inflation target. However, the eleven rate hikes they have implemented in recent years might not be enough.

Powell also cautioned that investors should not be too optimistic about rate cuts early next year. He said the FOMC will be quick to tighten policy if the need arises.

Powell Speech Boosts Gold Outlook

Market watchers considered Powell’s speech to indicate that the US economy was not as stable as it seemed. The view has raised the potential of the price of low-risk and safe-haven assets like gold to appreciate in the coming weeks.

In the latest reports, the jobless rate in the US rose to 3.90% in October, the highest since January 2022. Unemployment serves as one of the most critical indicators when gauging the stability of a country’s economy.

There is also growing concern that a possible escalation of the Israel-Hamas conflict might impact the West. The World Bank (WB) has warned about the prospect of a full-scale war if neighboring territories enter the fray.

In the worst-case scenario, should oil production and export are hit, petroleum prices may hit $150.00 per barrel. With significant uncertainty, gold and other risk-averse commodities may experience a surge in price.