Powell’s speech appeals to investors in risk and safe asset classes – .

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Powell’s speech appeals to investors in risk and safe asset classes – .


Federal Reserve Chairman Jerome Powell spoke virtually at the Economic Symposium, an annual event hosted by the Kansas City Fed. Traders and market participants have been waiting for his speech to gain a better understanding of the Federal Reserve’s current sentiment regarding its highly accommodative monetary policy. The tone of his prepared remarks was interpreted as being more conciliatory than that of last month’s FOMC meeting.

Towards the end of his prepared speech, President Powell said: “This brings me to a concluding word on the way forward for monetary policy. The Committee remains steadfast in its oft-expressed commitment to support the economy for as long as necessary to achieve a full recovery. The changes we made last year to our statement on long-term goals and monetary policy strategy are well suited to meet today’s challenges.

The net effect on US equities and precious metals was strong upward movements in both asset classes. The NASDAQ composite closed at a new record, gaining 183 points and closing at 15,129.5011. The same goes for the S&P 500, which gained 39.37 points (+ 0.88%) and closed with an all-time high of 4509.37. Although the Dow Jones Industrial Average gained 242.68 points, a net gain of + 0.69%, it did not break its high from early August.

Based on gold, the most active Comex contract of December 2021 saw a significant gain of 1.41%, a total of $ 25.30 and closed above the key psychological level of $ 1,800. ounce. Gold closed the week at $ 1,820.50, just off the intraday high reached at $ 1,821.90. Powell’s words contained the right tone and timbre to satisfy investors and market participants.

There were two main takeaways from President Powell’s speech today. The first is that the Federal Reserve still regards the recent spikes in inflation to a large extent as transitory. The second important point to remember was that while he said they were close to cutting their monthly asset purchases by $ 120 billion, he made a big distinction between starting the cut and a timetable for the start of interest rate hikes.

The distinction between the cutback schedule and the rate hike schedule was made extremely clear when President Powell said: We have formulated a different and significantly stricter test. We have stated that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment and inflation has reached 2% and is on track. moderately exceed 2% for some time. We have a long way to go to achieve maximum jobs, and time will tell if we have hit 2% inflation on a sustainable basis. “

His speech allowed gold and silver prices to register substantial gains in the coming weeks. The next big data set that market participants will focus on will be the US Department of Labor’s employment reports for the month of August. This will be the key report members of the Federal Reserve consider when they meet at the September FOMC meeting.

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Wishing you, as always, good exchanges and good health.

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.

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