Gold Extends Drop as Traders Weigh Powell’s Loosening Rhetoric

Gold declined after Federal Reserve Chair Jerome Powell warned against any idea that the US central bank would start loosening monetary policy soon.

Powell signaled that the Fed will likely keep raising interest rates and leave them elevated for a while to contain high inflation. “Restoring price stability will likely require maintaining a restrictive policy stance for some time,” he said Friday in remarks prepared for the Kansas City Fed’s annual policy forum in Jackson Hole, Wyoming. “The historical record cautions strongly against prematurely loosening policy.”

Bullion slipped as much as 1% as Powell started speaking, but pared some losses as he finished the speech before extending the decline again. The dollar reversed losses to advance 0.2%.

“There is no waffling in Powell’s speech -- high rates will be here for some time. The only question now is will September be 50 bps or 75 bps,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York, referring to the size of the basis point increase. “Gold will fluctuate based on rate-hike expectations, perhaps in the $1,680-$1,820 range in the near future.”