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Gold prices holding steady as Powell provides little guidance on monetary policy

Kitco News

(Kitco News) - Gold prices are holding steady above $1,500 as Federal Reserve Chair Powell  revealed little new information on U.S. monetary policy.

In his much anticipated speech at the Jackson Hole Central Bank symposium, Powell down played the threats of U.S. economy as he highlighted the continued global threats to growth.

“Our economy is now in a favorable place, and I will describe how we are working to sustain these conditions in the face of significant risks we have been monitoring,” he said.

Gold price are holding near session highs following Powell’s comments. December gold futures last traded at $1,514.10 an ounce, up 0.40% on the day.

Powell continued to highlight growing uncertainty due to the ongoing trade war but he down played the threats noting that consumer demand remains a strong driver of domestic growth.

“We have seen further evidence of a global slowdown, notably in Germany and China. Geopolitical events have been much in the news, including the growing possibility of a hard Brexit, rising tensions in Hong Kong, and the dissolution of the Italian government. Financial markets have reacted strongly to this complex, turbulent picture,” he said. “Meanwhile, the U.S. economy has continued to perform well overall, driven by consumer spending. Job creation has slowed from last year's pace but is still above overall labor force growth. Inflation seems to be moving up closer to 2 percent. Based on our assessment of the implications of these developments, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”

Avery Shenfeld, senior economist at CIBC, described Powell’s speech as neutral, saying that the Fed head presented a laundry list of headlines of both good news and bad news.

“He didn't choose to stress his earlier view that this is only a midcycle adjustment rather than a long easing cycle, but the on the one hand, on the other hand description of recent developments doesn't clearly diverge from the midcycle ease scenario yet,.” Said Shenfeld. “Nothing earth shattering for markets today in our first quick reading of this.”

Although Powell struck a neutral tone in his speech some economists have noted it has provided enough fodder for market doves. Paul Ashworth, chief U.S. economist at Capital Economics said that the comments opened the door to a rate cut in September.

“In addition to a September rate cut, we also expect the Fed to cut rates by another 25bp in December,” he said.

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