Gold Soars to 3-½-Week Peak As Powell Offers No Clear Taper Signal

gold bars

Gold prices climbed to near a four-week high on U.S. Federal Reserve Chairman Jerome Powell’s dovish remarks. His statement pushed the U.S. dollar to a two-week trough and made the bullion cheaper for investors using rival currencies. It also boosted hopes for low-interest rates to remain for at least until the end of the year. Low-interest rates put pressure on Treasury yields and lower the opportunity cost of owning the non-interest-bearing metal.

Spot gold is currently trading at $1,814.58 per ounce as of 0815 GMT.

In his speech at the Jackson Hole economic conference, Powell affirmed the recovery of the U.S. economy and explained the reason for maintaining a loose monetary policy. But he did not give a timeline when the central bank will reduce its asset purchases or raise interest rates.

Phillip Futures senior commodities manager Avtar Sandu noted that market sentiments improved after the Jackson Hole conference. But the yellow metal needs to breach the resistance at $1,839 to encourage more buying. Stephen Innes of SPI Asset Management added that the market must readjust interest rate hike expectations after Powell’s speech.

Meanwhile, gold investors are now focusing on the U.S. nonfarm payroll report for August. The Fed made it clear that improvement in the labor market is a major prerequisite for tapering and tightening policy. DailyFX analyst Thomas Westwater said weak employment data would be positive for the bullion. But a better-than-expected report would push gold prices down because it would lift both the dollar and Treasury yields.

In physical trading, gold demand in India declined as jewelers held off purchases while waiting for a price drop. Dealers charged lower premiums this week. Investment demand was also weak since stocks are providing good returns. Also, jewelers went on strike to protest the mandated hallmarking of gold jewelry and artifacts.

In China, there was a slight increase in gold demand as investors took advantage of the weaker dollar. There was also a strong demand for heritage gold jewelry among affluent young Chinese consumers. These include gold bracelets, pendants and earrings that draw on traditional Chinese symbols and patterns, such as dragons, peonies and phoenixes.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators raised their bullish positions in COMEX gold contracts for the week that ended on August 24.