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Gold up Awaiting Fed Chief’s Testimony

Investing.com – One down, two to go, with Jay Powell.

Gold prices edged higher despite the Fed Chair not making any references to interest rates in a speech he delivered on Tuesday. It was, after all, a conference on stress tests sponsored by the Fed's Boston regional bank and perhaps not the best venue to discuss quantitative easing.

That leaves the central bank chief to his all-important two-day testimony to Congress beginning tomorrow to shed some light on how dovish he and his FOMC team might be at their July 30-31 monthly meeting.

Spot gold, reflective of trades in bullion, traded at $1,398.46 per ounce by 2:15 PM ET (18:15 GMT), up $3.20, or 0.2%, on the day. The session high was $1,400.04.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled Tuesday’s trade just 50 cents higher at $1,400.50 per ounce.

“As Powell speaks, we’ll see if we get any insight into longer-term Fed thoughts as well as a July rate cut confirmation,” J.J. Kinahan, Chief Market Strategist at TD Ameritrade, said in a Forbes commentary.

“The futures market still puts 100% odds on a rate cut of at least 25 basis points at the next meeting later this month,” Kinahan added.

Yet, some market participants have scaled back expectations that a July cut is almost a certainty after a 224,000-strong jobs growth in June signaled the economy may be too strong for an easing. The forecast jobs expansion was only 160,000.

Other Fed bankers lined up to speak this week are New York Fed President John Williams (NYSE:WMB), St Louis Fed president James Bullard, Fed Atlanta President Raphael Bostic, Fed Vice Chair for Supervision Randal Quarles, Richmond Fed President Thomas Barkin and Minneapolis Fed President Neel Kashkari.

Of these, the most closely watched would be Bullard, who was the only dissenting voice at the June Fed meeting, when the central bank decided to hold rates. The St. Louis Fed president is one of the more dovish members of the central bank’s policy-setting Federal Market Open Committee, or FOMC.

While Powell did not touch on monetary policy in his Tuesday speech, he will almost certainly clarify his current outlook when he testifies to Congress on Wednesday and Thursday.

“Powell could either reinforce market expectations for a rate cut or rein them in,” Investing.com analyst Jesse Cohen said. “The level of certainty that the Fed will cut rates in July is far from justified, so I'd be looking for Powell to push back against the dovish message that markets have priced in.”

The U.S. Commodity Futures Trading Commission’s latest Commitments of Traders report - released on Monday (a day later than usual due to the July 4 holiday) and covering data through July 2 - showed that long positions in gold had reached their highest level since Sept. 2017, ahead of the U.S. jobs report.

Elsewhere, the World Gold Council said on Tuesday that holdings in global gold-backed ETFs and similar products registered their largest monthly increase in seven years in June as investors priced in a new round of easing from central banks. The inflows helped drive gold to a six-year high of just under $1,440.

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