Why is Powell's Policy Direction Now Considered Dovish?
Gold prices have risen sharply again after the market interpreted Federal Reserve Chairman Jerome Powell's latest speech as dovish. Interestingly, this reaction differs from a few months ago, when similar comments were perceived as hawkish and put downward pressure on gold prices.
This difference in market response occurs because the context of US monetary policy has changed. In the initial phase of interest rate cuts, the Fed emphasized that easing measures would be carried out cautiously. At that time, the market perceived this message as hawkish because expectations of a rapid cut were not realized, resulting in a strengthening dollar and pressure on gold.
Now, with inflation declining and the risk of recession becoming increasingly real, Powell's statement that interest rate cuts would continue, albeit gradually, is seen as dovish. The market interprets this as a signal that liquidity will continue to loosen, driving a weaker dollar and lowering US bond yields. This condition is a positive catalyst for gold prices.
In addition to monetary policy factors, global geopolitical uncertainty is also strengthening demand for safe-haven assets. The combination of a weakening dollar, falling yields, and investment inflows into gold has kept this precious metal on a steady upward trajectory.
Analysts believe the shift in market interpretation demonstrates the importance of the monetary cycle context in interpreting Fed officials' speeches. The same Powell's tone can be interpreted differently depending on the policy phase and investor expectations.
Source: Newsmaker.id
