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Gold remains above the 50-day moving average as traders await Powell’s speech

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Tomorrow traders and investors will get more clarity and insight as chairman Jerome Powell speaks at the Jackson Hole Economic Symposium virtually. As of 6:01 PM EST gold futures basis the most active December 2021 Comex contract is fixed at $1794.50 which is approximately $0.70 below the effective close in New York as gold now trades in Australia. In New York gold traded to an intraday low of $1781.30 and a high of $1800.40.

Traders are hoping to get insight from Chairman Powell in regards to the timeline to taper their asset purchases of $120 billion monthly. Currently the Federal Reserve is allocating $80 billion each month for U.S. Treasuries, and $40 billion monthly to purchase mortgage-backed securities (MBS). The question is whether or not Chairman Powell indicates a timeline or onset of tapering and if he tempers the hawkish tone that was contained in the recently released minutes of last month’s FOMC meeting.

The less than accommodative tone that came out of the last FOMC meeting was based upon good economic growth in the United States coupled with strong employment figures from the latest jobs report. The last jobs report by the Labor Department indicated that there were an additional 943,000 new jobs added in July. However, they did not take into account the Delta variant, which is ravishing parts of the United States. This is because the Covid-19 Delta variant was not as troublesome then as it is now.

Gold and silver will most likely react based upon what Chairman Powell says and how his statements are reflected dollar strength or weakness as well as yields in U.S. debt. If, as many analysts believe, the Federal Reserve is forced to take a step backwards because of the effect that the Delta variant is having on economic growth it would be an exceedingly bullish factor for gold and silver.

Chairman Powell mentioned during his last speech that each subsequent wave of Covid-19 infections seems to have less of an impact on the economy. Recent data indicates strong GDP growth, and a report showed that the second-quarter GDP rose to 6.6% from its initial reading of 6.5%.

These recent fundamental events showing real growth and the potential for a genuine economic slowdown due to the Delta variant are two opposing forces is something the Fed will have to look at. Traders will also look for him to address exceedingly hot inflation. The Federal Reserve will continue to have to walk a tight rope between both the positive economic data, and the potential for the rise in Covid 19 cases to have a genuine impact upon the economic recovery. Gold should trade in a narrow range up until Chairman Powell speaks tomorrow.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer