Traders await Chairman Powell’s Jackson Hole Speech on Friday

All eyes, or more appropriately all ears of investors, traders, market economists, and analysts will be laser-focused as they listen to the speech from Chairman Powell at the central bank's summer symposium this Friday. Possibly one of the more important speeches made annually by the chairman, investors want to glean any possible insight or hints about the future monetary policy of the Federal Reserve.

Specifically, market participants want to know if the Fed will maintain its current mandate and raise rates by ¼% one last time this year, or if the Fed will pivot from its current monetary tightening campaign.

However, it is highly unlikely that Powell’s speech will have the shock and awe effect of last year’s speech at Jackson Hole where his underlying message was “pain” that would be felt by American consumers. In a 10-minute speech last year, Powell made statements that sent shockwaves through the financial markets. He focused on returning the economy to price stability saying that it would take “some time” and will require bringing “some pain to households and businesses”, labeling these actions as the “unfortunate cost of reducing inflation”.

Considering that inflationary pressures have declined from 9.1% at their peak in June 2022 with the most recent data indicating that inflation in July came in at 3.2%, it is unlikely that Powell will unleash a speech of fire and brimstone as he did one year ago. That being said, the Federal Reserve's mandate of taking inflation to 2% has not been taken off the table but rather reinforced by statements of multiple Federal Reserve officials.

Jack McIntyre, a Philadelphia-based fixed-income portfolio manager at Brandywine Global Investments Management, is not anticipating the chairman to make any “game-changing” statements in his speech. In a recent interview, he said, “Mr. Powell is likely to say something like "We've done a lot with monetary policy, but there's a lot more to do and our mission is not yet accomplished.”

The mainstream belief is that Chairman Powell’s speech at Jackson Hole will be moderately hawkish, a major pivot from last year that has created mild tailwinds moving both gold and silver to higher pricing. Silver has been trading higher since Thursday of last week, and gold is in its third consecutive day of higher pricing. Although today’s increase in gold is fractional at best these gains are in light of dollar strength which limited any stronger upside move.

As of 4:40 PM EDT, gold futures basis the most active December contract is up $3.20, or 0.17%, and fixed at $1926.20. Silver futures are up 0.54% or $0.12 taking the most active contract month to $23 46. Lastly, gains in both gold and silver overcame a strong dollar gaining 0.30% taking the index to 103.515.

Wishing you as always good trading,