Gold is looking for a resting place ahead of a significant event this Friday. The Jackson Hole Symposium where the Fed Reserve Chair Jerome Powell’s will address an audience.
Gold is currently priced at ~$1,792, after breaking down after a period of consolidation centred around $1,794 (as shown by the Fib bands) and then rebounding from prices as low as $1,779. The 50-EMA and 100-EMA have converged at the current price.
Before this, gold enjoyed a couple of days above $1,800. Talk of the metal testing as high as $1,820 fell by the wayside as even $1,810 proved too much for buyers. This price barrier might be down to the rising bond yields, especially in Europe and North America, indicating that an economic recovery is looking more likely.
For those who do not know, the Jackson Hole Symposium is held annually by the Kansas Federal Reserve. The event gathers a collection of economists, central bankers, and policymakers to discuss the issues about one topic. 2021’s topic is “Macroeconomic Policy in an Uneven Economy”, and the held virtually.
The attendee of the Jackson hole Symposium likely to create the most stir is Fed Chair Jerome Powell. Powell’s address will be streamed live (https://www.youtube.com/user/KansasCityFed) for anyone interested in directly hearing what he has to say and convey.
Much like the price of gold, we see swings in the perceived mood of the Fed.
One week, reports might suggest that the Fed is ready to pull the lever on a policy change. By the next week, weaker than expected economic data has dampened such expectations. It’s a game of seesaw.
Investors will be waiting to hear, from Powell's own mouth, new information concerning the Feds stance on Monetary policy. Several lower ranking Fed officials have begun to talk publicly and with boldness about tapering before the end of the year, including event organiser Kansas City Fed President Esther George.
What Powell doesn’t say could be just as important as what he does say. It is known that the Fed is now open to tapering its economic stimulus programs. It has, at least, primed the market to believe this.
The next step for the Fed is to introduce official timelines or reiterate that it has seriously considered some timelines. Drip feeding information and reiterating the same information over several appearances is a strategy of the Fed. It is a strategy that typically induces disappointment. In this respect, I think gold might fare well directly after Powell's presentation.