Background on Jerome Powell and the Fed’s Influence
Jerome Powell, the current Chair of the Federal Reserve (Fed), has been a central figure in shaping U.S. monetary policy since February 2018. As the head of the Fed, Powell plays a crucial role in determining interest rates and influencing economic stability. His upcoming speech at the annual Jackson Hole symposium has drawn significant attention from investors worldwide, particularly those in the commodities market.
Gold Market Reaction
On Thursday, gold prices remained relatively unchanged as investors anxiously awaited Powell’s speech. Spot gold dipped 0.1% to $3,342.25 per ounce, while U.S. gold futures for December delivery traded sideways at $3,386.50 per ounce.
The U.S. dollar index rose 0.4%, increasing the cost of gold for foreign buyers. Investors are keenly watching Powell’s speech to gauge whether he will emphasize strengthening the labor market or prioritize curbing inflation.
“If Powell hints at a rate cut in September, I don’t expect much movement since the market already anticipates it,” said Marex’s analyst Edward Meir. “Should he suggest the possibility of further rate cuts in October, November, or December, I believe the dollar could weaken, and gold prices might rise.”
Historically, gold tends to perform well in low-interest-rate environments.
The Fed has maintained interest rates since December, but market participants predict a 79% probability of a quarter-point rate cut in September, according to the CME’s FedWatch tool.
Among other precious metals, silver spot prices increased 0.6% to $38.11 per ounce; platinum fell 0.1% to $1,338.85 per ounce; and palladium dropped 1.2% to $1,100.79 per ounce.
Copper Market Performance
Copper prices fell during the light summer trading on Thursday, as markets anticipated the Fed’s annual Jackson Hole symposium and Powell’s speech.
The benchmark copper price on the London Metal Exchange fell 0.3% to $9,690 per tonne. On Wednesday, it touched $9,670.50 per tonne, its lowest level since August 7th.
“The weakness reflects the upcoming Jackson Hole event, where speeches will be crucial. Additionally, there’s a growing risk aversion noticeable in the decline of technology stocks,” said Dan Smith from Commodity Market Analytics.
Codelco, Chile’s copper mining giant, announced it would lower its 2025 production forecast following a mishap at its flagship mine, El Teniente, which reduced output by 33,000 tonnes. In March, the company stated that its 2025 target range was between 1.37 million and 1.4 million tonnes.
Key Questions and Answers
- Who is Jerome Powell, and why is his speech important? Jerome Powell is the Chair of the Federal Reserve, responsible for setting U.S. monetary policy. His speech at the Jackson Hole symposium is crucial as it provides insights into the Fed’s stance on interest rates and inflation, influencing global markets, including gold and copper.
- What factors affect gold prices? Gold prices are influenced by interest rates, the U.S. dollar’s strength, and market expectations of future monetary policy decisions by central banks like the Fed.
- Why are copper prices falling? Copper prices have decreased due to anticipation of Powell’s speech at the Jackson Hole symposium and growing risk aversion in technology stocks, as well as Codelco’s lowered 2025 production forecast following a mining accident.
