Gold price extends rally after data shows unexpected contraction in US economy. gold markets
In an earlier statement, Fed Chairman Jerome Powell said the Federal Open Market Committee “is strongly committed to returning inflation to its 2% objective,” repeating language that it’s “highly attentive to inflation risks.” Powell also said officials would set policy on a meeting-by-meeting basis rather than offer explicit guidance on the size of the next move.
“Wall Street is convinced that the Fed will likely pivot to a slower pace of tightening in September,” Ed Moya, senior market analyst at Oanda Corp.,“The unexpected contraction of the US economy means that both the peak in Treasury yields has been made and a bottom has been formed for gold. The stagflation playbook is bullish for gold prices and that appears how many traders will be positioning themselves going forward,” Moya added.
“The absence of a specific timeline pertaining to the moderation of interest rate hikes still carries some form of vagueness,” said Yeap Jun Rong, market strategist at IG Asia Pte. “Gold prices are riding on the hopes that with it being brought up by Powell at the meeting, some consideration is in place and moderation could come sooner rather than later.”
“That said, the Fed has maintained its clear focus on taming inflation and the upside risks to inflation clearly remains,” said Yeap. “This carries the risk of any inflation persistence ahead keeping the pressure on for the Fed to continue on its hawkish path and put a cap on gold prices’ upside.”
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