Gold market searches for direction: Fed Chair's remarks will be decisive

Just before the symposium held in Jackson Hole, gold investors are maintaining a cautious wait-and-see approach. Spot gold, which started the week with gains, had reached its highest level in three months following the US Treasury Department's support measures in the long-term bond market. However, profit-taking and the anxiety created ahead of the messages from the Fed have put pressure on the market, and as of 07:00 TSI, spot gold retreated by 0.5 percent to the 4,576.30 dollar level. US gold futures also saw a similar decline of 0.8 percent, falling to 4,629 dollars.

ANALYSTS: "HAWKISH MESSAGES COULD CAUSE SHORT-TERM RETREAT"

Markets are focused on Fed Chair Kevin Warsh's speech at Jackson Hole. StoneX Senior Analyst Matt Simpson commented, "It is possible that Fed Chair Warsh will make more hawkish statements than the markets anticipate. Such a development could lead to a pullback in gold prices, even if it is short-lived." Simpson points out that potential declines could mean buying opportunities, especially for investors who are targeting the 5,000 dollar level but missed the previous rally.

It is noted that concerns regarding the course of inflation in the US are coming to the fore in Jackson Hole. Recently released data showed that the Personal Consumption Expenditures (PCE) price index rose by 3.7 percent on an annual basis in July. Expectations regarding interest rate policy directly affect investors' positions. According to CME FedWatch data, the probability of the Fed raising interest rates in September is 33.9 percent, and this probability rises to 74 percent by December. In an environment where interest rates are rising, gold, which does not provide interest income, can become less attractive to investors. Therefore, the Fed's statements are expected to affect gold prices through both the dollar and bond yields.

DECLINE CONTINUES IN PRECIOUS METALS

Beyond gold, a downward trend prevails in other precious metals as well. Spot silver traded at 68.54 dollars with a 1 percent loss. Christopher Wong pointed out that for the upward movement in silver to continue, bond yields need to fall and the price needs to exceed the 70.60–72.00 dollar resistance range. Platinum decreased by 0.6 percent to 1,834.83 dollars, while palladium fell by 0.8 percent to 1,339.84 dollars.

LONG-TERM EXPECTATIONS

OCBC Precious Metals Strategist Christopher Wong states that in addition to interest in exchange-traded funds and futures, uncertainties regarding the US budget outlook and central bank gold purchases are supporting prices. While Wong expects consolidation in the short term, he states that investors have their eyes fixed on the Fed's statements and the interest rate outlook. The extent to which potential fluctuations will affect gold's long-term upward potential will become clearer in the coming period.

News Source: 12punto