Jerome Powell adopts a dovish attitude
In his remarks prepared before his testimony before the US Congress, Federal Reserve Chairman Jerome Powell leaned toward a dovish stance. He added that the inflation outlook in the United States appears moderate and remains below the FOMC target of 2%.
Market participants feared that a job report released in June, better than expected, would jeopardize the prospects for rate cuts. Powell, however, settled these concerns. He said the report had not changed the Fed's outlook on the economy and interest rates. As stated by CNBC, he said: "I think that since the June meeting, and even for a period before that, the data have continued to disappoint, which is very wide in Europe and around Asia. and that continues to weigh. "
Lower economic data
Powell also pointed to the weakness of manufacturing, trade and investment data around the world. He also said that the recent trade break between the United States and China has not eased uncertainties over the US economic outlook. World trade and PMI (Purchasing Managers Index) data are deteriorating. At 49.4, the global manufacturing PMI indicates a contraction in the manufacturing sector in June. The data also indicated a contraction rate faster than in May, while the reading was 49.8. Of 30 countries, 18 showed contractions, including China, Japan, Germany and the United Kingdom. In contrast, the United States, India, Brazil and Australia reported growth.
In the aftermath of Powell's dovish trends, stock markets are reaching unprecedented heights. The S & P 500 (SPY) index has exceeded 3,000 for the first time. At 1:00 pm Eastern time, the increase was 0.52%. In addition to the markets, gold has also gained a lot. At 13:00 local time, the SPDR Gold Shares ETF (GLD) rose 1.05% for the day. Gold rose 8% in June alone, as the Fed expects a drop in interest rates and the weak US dollar.
Gold shines on the Fed's dovish position
While Powell's comments indicated a rate cut in July, the price of gold has jumped again. Since gold yields nothing in terms of regular revenue, falling interest rates increase investors' interest in gold and make it competitive with other assets. Falling US interest rates are also reducing the attractiveness of the US dollar (UUP), as yields on US Treasury bonds (TLT) fall. After accommodating comments from the Fed, Invesco DB USD / Bullish (UUP) fell 0.4% at 1:00 pm ET.
In Gold Breaches $ 1,400: What is the next stop? We discussed the factors that affect the outlook for gold prices and how most are heading in the right direction for rising gold prices.
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