Is gold’s price back on track?
The spot gold price has once again crossed the psychological threshold when Kevin Warsh, the Federal Reserve Chair, eased market participants’ concerns about possible further tightening of monetary policy this year.
Warsh’s remarks, delivered on Wednesday during the European Central Bank forum in Portugal, were received as less hawkish than expected.
Combined with earlier tensions caused by the U.S. conflict with Iran, they contributed to limiting expectations of further rate hikes by the Fed.
Warsh emphasized that the central bank intends to ensure price stability and bring inflation down to 2%, “disappointing” everyone who expected monetary easing championed by Donald Trump.
“If people thought that this central bank would compromise the inflation target above 2%, they will be disappointed,” he said, stressing that he does not intend to give many hints about the direction of both monetary policy and the economy.
“We have long been an independent central bank. We will remain so now, and you will see no changes in this regard,” he added.
During Warsh’s speech, investors slightly reduced their bets on rate hikes, but still assess the probability of the Fed raising borrowing costs at the September 15–16 meeting to almost 50%.
“It increasingly looks as if investors’ early assumption that the Fed under Warsh’s leadership would quickly lower rates will not hold,” said Warsh Oren Klachkin, a Nationwide economist.
“The risk balance has clearly shifted,” he added, expecting the Fed to ultimately keep rates unchanged until the end of the year.
Table. Market‑priced probability of Fed rate changes at upcoming meetings
Source: CME FedWatch Tool.
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Gold and silver prices on Thursday, July 2
Gold’s spot price on Thursday, July 2 is at USD per ounce.
Earlier it was expected to see its deepest quarterly drop in 13 years, since the second quarter of 2013, when tensions in the Persian Gulf region heightened inflation concerns in markets.
Chart. Spot gold price (XAU/USD)
Source: Trading Economics.
Silver’s price is at USD per ounce.
Chart. Spot silver price (XAG/USD)
Source: Trading Economics.
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Source: Reuters.
