The US Federal Reserve, according to its chairman Jerome Powellis preparing to cut interest rates next month. Amid these statements, gold has stabilized at around $2,510 an ounce, approaching record levels.

Photo: commons.wikimedia.org by Gold&Co, Goldankauf Wien, Handel mit Edelmetallen, CC BY-SA 4.0

Powell said Friday in Jackson Hole, Wyoming, that “the time has come” to ease monetary policy and stressed his intention to prevent further weakening of the U.S. labor market. Lower interest rates traditionally increase the appeal of gold because the metal does not pay interest, unlike Treasury bonds.

Gold has posted an impressive gain of more than 20% this year, driven in part by expectations of a change in Fed policy. Further support for gold has come from central bank and Asian consumer demand, as well as rising geopolitical risks and uncertainty ahead of the US presidential election in November. At the time of writing, gold was steady at $2,515.12 an ounce, having recently hit a record high of $2,531.75. The Bloomberg Dollar Spot Index was also steady after falling 1.2% last week. Meanwhile, silver was little changed, while platinum and palladium were down.

The current week promises to be full of data from the U.S., which could impact expectations for the pace of rate cuts. In particular, investors will be focused on the July personal consumption expenditures price index, the Fed’s preferred inflation gauge, which is due out on Friday. Investors are also keeping an eye on escalating tensions in the Middle East after Israel struck Hezbollah targets in southern Lebanon over the weekend.

Clarifications

Federal Reserve System (Federal Reserve System, FRS, Federal Reserve, the Fed) is an independent federal agency specially created on December 23, 1913 to perform the functions of a central bank and exercise centralized control over the commercial banking system of the United States of America.

Troy ounce (English: troy ounce) is a unit of mass equal to 31.1034768 grams.

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