Powell Threads the Needle at a Conference Held by the IMF

Jerome Powell’s Statements Impact Gold Prices

Chairman of the Federal Reserve Jerome Powell made statements today that relieved some of the pressure that was brought on yesterday by Fed officials that were perceived as bearish for gold. Although his comments did aid in gold rising in price today he continued to be ambiguous about future Fed actions.

“We are not confident,” he said, that the Fed’s benchmark rate is high enough to steadily reduce inflation to its 2% target. “If it becomes appropriate” to raise rates further, “we will not hesitate to do so,” Powell added, suggesting that for now it isn’t “appropriate” to increase its benchmark rate.

His remarks mirrored those made by many Fed officials who stated that the best course of action was to “monitor the markets closely” a phrase often used to say that rates will remain unchanged. Rates did go unchanged for the second FOMC meeting in a row and remained between 5 ¼ – 5 ½%. It is widely known that the aggressive rate hikes since March 2022 have not had their full effect on markets yet and that is another reason why the Fed chose to hold their benchmark interest rate steady.

In the Middle East, there are talks of a humanitarian three-day cease-fire. Although the cease-fire has yet to be confirmed. Israeli Prime Minister Benjamin Netanyahu has said any temporary cease-fire would have to be accompanied by the release of hostages seized by Hamas during the Oct. 7 attack. Israel has stated that around 240 hostages remain captive in Gaza.

Gold Prices Reflect Changing Perceptions of Israel/Hamas Conflict

Gold prices seem to suggest that either the world is expecting the Israel/Hamas war to come to an end soon, or that the world isn’t focusing on the matter as much as it had back in October.

Gold prices basis the most active December futures rose by $6.10 or 0.31% today and as of 4:45 PM EST are trading at $1963.90. Technically gold futures seemed to have found support at the 100-day moving average which currently sits at $1954.60. Although gold traded to higher prices today, it did so with a lower high and lower low than yesterday, a trend that has been in play for the past five consecutive trading days. This suggests that the rise in gold today could largely be caused by traders short covering, or exiting their short positions by buying gold.

The modest rise in gold prices came despite a rise in the U.S. dollar, the dollar index was also up around a third of one percent (0.31%) gaining 0.33 points today. According to the Kitco gold index if it were not for the rise in the dollar gold would have exceeded $15 in gains today.

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Wishing you as always good trading,

Gary S. Wagner