What will Powell do at Jackson Hole and what will it mean for gold? Analysts weigh



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(Kitco News) – With the looming decision of the Federal Reserve in September, President Jerome Powell will likely leave much room for maneuver at the central bank during his speech at the Jackson Hole symposium Friday, analysts said.

Analysts do not see Powell open the door to a cut of more than 25 basis points in September during his speech at Jackson Hole titled "The Challenges of Monetary Policy."

Powell's appearance on Friday could be guided by the same theme as his July press conference, which did not engage the Fed, told Kitco News Rhona O. Connell, Market Analysis Manager at INTL FCStone for the EMEA region and Asia.

"What Powell was doing at the press conference on July 31 laid the groundwork for Friday, and he, very cautiously, did not engage the Fed, he gave himself some leeway, which is a sensible thing to do because it does not control the global market. " And it must give the Fed the leeway needed to deal with developments, "said O. Connell.

During Jackson Hole's speech, Powell will likely open the door to a further 25 basis points cut, while avoiding further promises.

"Powell will be aware that the first rate cut in July almost caused some uncertainty among consumers as it raised concerns about whether they should spend now or not," said O & # 39; Connell.

The Fed wants to further stimulate the market, but avoid any fear that could delay major purchases.

"Another 25 basis points is probably cautious to get more stimulation in the market, but a 50-point reduction could send flashing red lights into consumer sentiment and could be self-destructive," O added. Connell.

Robust US economic data will also compel Powell to avoid [the Fed] in another corner, "said Monday Win Thin, head of global monetary strategy at BBH.

"Even if the door has and should be left open to new stock, we do not think Powell will paint the Fed again in a corner, not when the data suggests otherwise," Thin wrote. "Indeed, US data is showing a positive picture last week." Overall retail sales rose 0.7% m / m vs. 0.3% expected … The so-called control group used for calculating GDP jumped 1.0% m / m versus 0.4% expected. "

In addition, the Federal Reserve is still trying to understand how it should respond to global trade tensions, Thin added.

"Nobody can really say what is the likely reaction of the Fed at this time with a certain degree of confidence.The markets clearly believe that the Fed will redouble efforts, but we are not so sure, we do not think the Fed should reward bad trade and tax policies with rate cuts, "he said.

At the same time, US President Donald Trump has not let go to pressure the Fed to reduce rates more aggressively.

"The Fed's rate, over a fairly short period, should be reduced by at least 100 basis points, with perhaps some quantitative easing," Trump said in an article on Twitter.

BBH believes, however, that the Fed will be reluctant to cut rates early, adding that the central bank will want to see the real impact of tariffs first.

"We do not think the Fed wants to be seen as adhering to Trump's demands, the Fed is also right to note that the impact of tariffs has not yet been fully felt and thus remains unknown," said Thin.

Powell will likely be more hawkish than the markets anticipate, said Chris Weston, head of research at Pepperstone. "With a 32% chance of a 50 basis point reduction in the September FOMC rate markets, he is generally confident that Powell will be more fierce than the current price suggests and that this could be a positive business in USD, "said Weston. said in a note on Monday.

On Monday afternoon, however, market sentiment seemed to point towards a less accommodating climate. At the time of writing this report, the markets were expecting a 25-basis-point reduction in probability over 95 percent and only 5 percent on 50 points, according to CME FedWatch Tool.

What does all this mean for gold?

A more hawkish Powell could result in further consolidation of the gold price this week, analysts said.

"At some point, when the price will not give you any more momentum, you will see profit taking. To be so high in such a short time, you would normally expect a larger downturn. a, "said O. Connell.

O & # 39; Connell added that it would still be a bull market, noting that the next support would be between 1,480 and 1,450 dollars.

"Market that has enough uncertainty.Any recession will be a correction.We have changed the range of gold.In the current environment, it is impossible to call a bear market. $ 600 may be coming, but we will not get it in a straight line, "she said.

This week, gold fights the stock market rally and the feeling of risk, said Kitco 's senior technical analyst.

"Gold and silver prices are lower on Monday in the United States on Monday, as risk appetite of investors and investors has risen sharply to start the week of trading. … Bull markets, even the strongest ones, do not see prices going up every day., The corrective graphical consolidation is sound and suggests that the uptrend can be maintained, "said Wyckoff.

At the time of writing these lines, the December Comex gold was trading at $ 1,507.20, down 1.08% on the day.

Warning: The opinions expressed in this article are those of the author and may not reflect those of the author. Kitco Metals Inc. The author has endeavored to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. It is not a solicitation to exchange products, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept any liability for losses and / or damages resulting from the use of this publication.

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