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Gold Bounces Off Lows Following 'Dovish' Comments From Powell

Kitco News

Jerome Powel, Chair of the Federal Reserve

(Kitco News) - Gold remains under pressure Friday but is off its lows following what some economists have deemed as dovish comments from Federal Reserve Chair Jerome Powell.

Speaking at the American Economic Association's annual meeting in Atlanta, Powell struck an optimistic tone for 2019, saying that he expects to see labor-market strength continue into 2019. However, he added that the central bank is paying attention to market signals that are flashing downside risks.

He added that because of muted inflation pressures, the central bank can afford to be patient.

“We are listening sensitively to what markets are signaling and will take into considerations growing downside risks,” he said. “We will be able to adjust monetary policy quickly and flexibly should that be needed.”

Adam Button, senior currency strategist at, said that Powell’s comments are a notable shift in his outlook.

“The line 'quickly' is especially notable, it's a dovish shift. He's basically putting on a Powell put,” he said.

Powell also walked back part of his comment in December that the Federal Reserve’s balance-sheet reduction plan is on “autopilot,” which spooked equity markets significantly.

He said that the Federal Reserve would not “hesitate to make a change” to the balance-sheet reduction if data showed that it was harming U.S. economic growth.

Paul Ashworth, chief U.S. Economist at Capital Economics agreed that Powell comments were on the dovish side; however, he added that the Fed appears to be adjusting its view in light of the growing market turmoil.

“We all the market volatility we have seen it’s not surprising to see a bit of a change in stance from the Fed,” he said.

Ashworth also added that he doesn’t expect Powell’s comments to shift the central bank’s plan to raise interest rates two more times this year. Capital Economics is expecting two rate hikes in the first half of the year before the central bank halts its current tightening cycle.

The U.S. dollar has lost some traction following Powell’s comments, which has benefited gold prices. February gold futures last traded at $1.286.70 an ounce, down 0.63% on the day. Prior to Powell’s comments, gold was down more than 1% as markets reacted to a blockbuster employment report, which showed that 312,000 jobs were created in December.

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