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Gold futures gained more than 1% but finished just short of record highs on Friday after Federal Reserve Chairman Jerome Powell sent his strongest signal yet that the central bank will cut interest rates in September.
"The time has come for cuts," Powell said at the Jackson Hole Economic Symposium, increasingly confident that inflation will return to the central bank's 2% target, pushing Treasury yields and the dollar lower while helping to boost bullion.
Powell had "remained very tight-lipped with his approach, but he has made it clear that the time has come for the interest rate cycle to reverse its direction, which brought a lot of excitement among gold traders," HowToTrade analyst Connor Woods told Dow Jones.
The Fed chief "does not want a further cooling of the labor market, which suggests he is ready to cut in September and may get more aggressive than 25 bps if there is more weakness than anticipated," TD Securities global head of commodity strategy said, according to Bloomberg; the bank expects bullion to rise further to more than $2,700/oz in the coming quarters.
Minutes from the Fed's July meeting released recently showed several officials making a case for cutting rates next month, and the latest jobs data which revealed much weaker employment growth than previously reported has reinforced that rate cuts are all but certain.
Front-month Comex gold for August delivery (XAUUSD:CUR) closed +1.2% to $2,508.40/oz, its second highest settlement in history after its high point of $2,511.30 hit on August 20; for the week, the yellow metal finished up 0.4%, its fourth consecutive weekly gain.
The most-active gold contract for December delivery also rose 1.2% to settle at $2,546.30/oz, just shy of the all-time settlement high of $2,550.60 from Tuesday, after trading as high as $2,554.50 intraday, not quite reaching Tuesday's record intraday high $2,570.40 for a most active contract, according to Marketwatch.
Front-month August Comex silver (XAGUSD:CUR) ended +2.7% to $29.786/oz, its best settlement value since July 18; for the week, silver closed 3.5% higher.
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With Powell's speech now out of the way, gold prices may have absorbed the news of the Fed policy shift, so there may be "some pullback and profit-taking given these all-time high levels," Joy Yang, head of marketing and product management at MarketVector Indexes, told Marketwatch.
However, gold has not yet surpassed its inflation adjusted highs and is still slightly short of keeping up with the long-term inflation trend, Yang said.
Junior gold mining stocks (GDXJ) are still below their historic peak, according to Yang, believing their "strong cash flow and expanding margins" mean they "have room to close the gap to gold spot prices."