Market Snapshot: Gold prices head lower, set to snap weekly streak of gains ahead of Powell speech

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Gold futures on Friday headed modestly lower ahead of much-awaited speech from Federal Reserve Chairman Jerome Powell near Jackson Hole, Wyo., which could provide some insights about health of the U.S. economy and the path of monetary policy — key drivers for commodities.

Powell is set to speak Friday at 10 a.m. Eastern Time.

Powell’s speech comes after Kansas City Fed Esther George and the Philadelphia Fed President Patrick Harker, said on CNBC that they would like to hold interest rates steady.

The Fed lowered its benchmark rate to a range between 2% and 2.25% back in July and has another policy decision on Sept. 18, with market expectations running high that another quarter-of-percentage point cut will be delivered amid signs of weakness in the U.S. economy, a slide in bond rates and an inversion of the closely watched spread between the 10-year U.S. Treasury note TMUBMUSD10Y, -0.06%  and the 2-year Treasury note TMUBMUSD02Y, -1.05%, A so-called inversion of the yield-curve of that spread occurred earlier this week and has been an accurate predictor of recessions.

Against that backdrop gold has been buoyant but its gains have paused this week.

December gold GCZ19, +0.27%  was off $2.80, or 0.2%, at $1,505.70 an ounce, after sliding 0.5% lower on Thursday. For the week, gold is set to fall 1.2% based on last Friday’s settlement for the most-active contract. The commodity has booked a weekly gain in the past three weeks consecutively, FactSet data show.

Advances for global equities, and U.S. stock futures early Friday, as well as a firming of the U.S. dollar against its major counterparts, were all serving as a drag on bullion appetite ahead of Powell. The U.S. dollar, as gauged by the ICE U.S. Dollar Index DXY, +0.16%, a measure of the buck against six major currencies, was up 0.3%.

A stronger dollar weighs on commodities priced in the currency because it makes it comparatively more expensive for buyers using other monetary units, while gains in stocks can undercut appetite for haven assets.

“Gold is steady heading into the speech, holding on around $1,500 and, it seems, waiting for the nod to either continue its run higher or move more into correction territory,” said Craig Erlam, senior market analyst at brokerage Oanda, in a daily research note.

“There’s clearly no overwhelming desire to bet against gold right now which is understandable given the environment but a more hawkish Powell could trigger some profit taking following such a surge,” he wrote.

The analyst said a fall for gold below a psychologically significant level for traders at $1,500 won’t be as significant as a breach of $1,480, which he said would indicate traders are pulling back and “allowing the correction to take place.”