Gold price lifted by Fed’s dovish remarks on tapering

Gold climbed higher on Friday as Federal Reserve chairman Jerome Powell stopped short of signaling when the central bank would dial back its economic support, while reiterating his view that the current price spikes are transitory.

Spot gold rose 1.1% to $1,811.51 per ounce by 11:50 a.m. EDT, breaking past the $1,800 level for the second time this week. US gold futures were up 0.9%, trading at $1,811.60 per ounce in New York.

In a virtual speech at the Jackson Hole symposium earlier, Powell stated that the central bank could begin reducing its monthly bond purchases this year, though it is not in a hurry to begin raising interest rates thereafter.

The dollar sank as the Fed Chair spoke, allowing gold to gain as investors closed bets on a tapering timeline being announced.

“Powell’s speech is slightly dovish but not dovish enough to jump-start any large-scale buying in precious metals,” Nicky Shiels, head of metals strategy at MKS (Switzerland) SA, told Bloomberg on Friday.

“It was his strongest signal yet that the taper will begin this year (not next) and he didn’t fully capitalize on the risk of the delta variant on policy,” Shiels said.

Powell’s much-anticipated speech eased prior concerns that the central bank will soon tighten monetary policy to combat inflation. A rapid increase in US prices linked to snarled supply chains and shortages had raised the prospect of an early reduction in stimulus, which has cast a shadow over the gold market this month.

“The speech was interpreted as the Fed Chair offering no fresh news and people who had betted on him providing some clear tapering time line were left disappointed,” Fawad Razaqzada, market analyst at ThinkMarkets, said in emailed comments.

“I wouldn’t be surprised if gold were to stage a stronger recovery now,” he added.