Credited: Bloomberg

Powell affirmed expectations that officials will begin lowering borrowing costs next month and made clear his intention to prevent further cooling in the labour market. “The time has come for policy to adjust,” Powell said on Friday in the text of a speech at the Kansas City’s Fed’s annual conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.” 

Treasury yields and the dollar pushed lower, helping boosting bullion by as much as 1.3%. Lower rates are typically positive for bullion as it pays no interest. Gold traded as high as US$2,517.92 (RM11,018.20) an ounce after Powell’s comments. Gold had surpassed US$2,500 an ounce for the first time this month, as expectations mount that the Fed is getting closer to its pivot to lower interest rates, which tend to benefit non-interest bearing gold.

Prices had soared to unprecedented levels already earlier this year despite the headwind of high borrowing costs, with support from strong central bank purchases, Chinese consumer buying and haven demand due to rising geopolitical risks, including tensions in the Middle East and Russia’s war with Ukraine.

In recent days, swap traders have cemented bets that Fed policymakers will cut by as much as one percentage point by year-end, starting in September with the likelihood of a 25- or even 50-basis-point cut.  Minutes from the central bank’s July meeting signaled several officials saw a case for lowering borrowing costs next month, and the latest jobs data, which revealed that employment growth was far less robust than previously reported, reinforces that the cuts are all but assured.

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