(Kitco Commentary) - Over the last week the CME’s own FedWatch tool has quietly eroded away conviction for a September interest rate reduction. A week ago, the tool that utilizes positions made by futures traders to form a surprisingly accurate prediction of odds for what interest rates will be at any given month for up to 16 months into the future.
Jerome Powell’s Final Jackson Hole speech as acting chairman of one of the most important organizations to America’s economic future and to some extent, the global economy. Meanwhile the odds of a September rate cut have shrunken to 75% from an almost certainty one week ago. This lack of optimism for monetary easing has been gold’s strongest headwind. While it is highly unlikely that a rate cut will be “announced” at the annual meeting put on by the Kansas City Federal Reserve. Anyone who knows Powell knows that “data dependent” is tattooed across Powells mid-section and will be inscribed upon his headstone. With that in mind traders are going to comb through every aspect of his words, tone, and even body language to decipher what he is “actually” saying.
The real reason for a September cut is no longer seen as a given has to do with the info revealed in the July Minutes in Which only two members voted to cut rates in September. For that reason, gold will continue to face an uphill battle no matter what is said Tomorrow. This can be seen on gold’s daily chart showing 6 of the last 9 trading sessions resulted in gold closing lower. Over the past 10 day’s gold futures have given up over $100 of value and where last seen at $3,384.50.
The fact that gold is still near record levels shows gold’s resilience since making the first of a serries of all-time highs on April 22nd. In fact, gold has only given up 3.90% since the close of that day. Over eighty days ago gold breached $3,300 for the fist time in history and for the last 90 days gold has faced many different bearish forces and came out on top every single time. The real drivers of gold’s price remain strongly bullish so regardless of what is said tomorrow gold will likely remain on its current trajectory and at worst could experience a minor, short lived pullback. As long as $3,300 is unbroken support gold can only get stronger from here.
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