Gold futures recovered from overnight weakness Monday, largely moving inversely to the U.S. dollar as markets continue to digest comments from Federal Reserve officials at their weekend symposium in Jackson Hole and while waiting for a key report on the U.S. labor market at the end of the week.
As of 1:25 p.m. EDT, Comex December gold was $1.10 higher to $1,326.90 an ounce. December silver was up 11.5 cents to $18.86.
The precious metal initially came under pressure at the start of Asia-Pacific trading, with the December contract sliding to a two-month low of $1,317.20 an ounce. Analysts at the time blamed this on U.S. dollar gains in the aftermath of hawkish comments from Fed Chair Janet Yellen and Vice Chair Stanley Fischer, hinting at a possible U.S. interest-rate hike, as last week was winding down.
The CME Group's FedWatch tool showed the market pricing in more than a 30 percent chance of a hike in September, up from 18 percent before Yellen and her deputy Fischer spoke.
George Gero, managing director with RBC Wealth Management, pointed out that gold was able to withstand “headwinds” from Yellen and other Fed speakers last week suggesting potential tightening. The metal was helped by ideas by many – although not all – market participants that any tightening probably won’t occur until December, Gero explained.
He pointed out that September is when the U.S. presidential election will be heating up, thus Fed policymakers may want to avoid looking political by acting then. “And then of course they don’t want to look like the Grinch that stole Christmas,” he continued, explaining that policymakers may be careful to avoid hurting holiday sales.
“While everyone at the (Fed) conclave in Jackson Hole seemed to echo the chair making the strong case for a rate hike this year, it’s not imminent,” Gero said.
Reference: Kitco, Reuters
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