Gold Strengthens After Warsh's Comments Ease Fed Pressure
Gold prices strengthened on Wednesday (July 1) after market participants weighed comments by Federal Reserve Chairman Kevin Warsh at the annual central bank forum in Sintra, Portugal. The precious metal received a boost after the US dollar and bond yields pared their gains.
Gold briefly rose as much as 2.7% after Warsh reiterated that the Fed would not provide forward guidance on the next interest rate direction. He called this approach a significant shift in the central bank's communication style. Warsh also said price risks had declined in recent weeks, although he maintained his commitment to bringing inflation back to the 2% target.
The statement helped ease market concerns that Warsh would appear more hawkish. Previously, investors were concerned about the possibility of the Fed signaling more aggressive interest rate hikes to curb persistently high inflation.
Spot gold traded up around 0.7% to US$4,038.26 per troy ounce in the New York session, while US gold futures for August delivery were around US$4,082.
Gold had previously been under pressure after hitting a record high in January. Pressure arose as the market increased bets that the Fed could still raise interest rates this year, even though energy prices began to decline following the interim agreement between the United States and Iran. High interest rates weighed on gold because the precious metal offers no yield.
US economic data also continued to show a relatively strong economy. Manufacturing activity continued to expand for the sixth consecutive month, while pressure on input costs, which had risen due to the war, began to ease. However, ADP data showed that private sector jobs only increased by 98,000 in June, lower than market expectations.
Investors' attention now turns to the Nonfarm Payrolls report, which will be released Thursday. The data is expected to show the US economy added around 115,000 jobs in June. If employment data is again strong, expectations for a Fed rate hike could rise again and limit gold's gains.
In other metals markets, silver rose about 2%, while platinum and palladium also strengthened. The Bloomberg Dollar Spot Index remained slightly higher, but weakening yields helped maintain buying interest in precious metals.
Overall, gold's current rally is driven by a combination of Warsh's less aggressive comments, weaker private employment data, and a correction in yields. However, to confirm a stronger recovery, gold still needs to hold above US$4,000 and consistently break through the US$4,100 area. (arl)
Source: Newsmaker.id
