Gold Prices Rise with Powell's Hint at Interest Rate Cut in September

SadaNews - Gold prices rose as the dollar weakened after Federal Reserve Chair Jerome Powell cautiously opened the door to a potential interest rate cut in September, indicating increasing risks facing the labor market despite ongoing inflation concerns.

In a speech delivered on Friday during the annual conference of the U.S. central bank in Jackson Hole, Wyoming, Powell stated: "The stability of the unemployment rate and other labor market indicators allows us to proceed cautiously in considering any changes to our monetary policy stance. However, the presence of monetary policy in a restrictive position, along with the underlying outlook and shifting risk balance, may necessitate an adjustment of this stance."

Increased Bets on Rate Cuts

Traders have increased their bets that the U.S. central bank will cut interest rates next month following Powell's speech. Gold prices rose by 1.1%. Gold typically benefits in a low interest rate environment.

Gold Price Recovery

"With rising expectations for U.S. interest rate cuts after the speech, gold may be on the verge of reaching a new record level," according to Ewa Manthey, a commodity strategy expert at the ING Group. Powell's speech is considered "the only missing factor to revive the recovery we witnessed earlier this year."

Expectations for lower borrowing costs, along with geopolitical tensions and central bank purchases, drove gold prices to a record level in April, and it remains up over 28% this year. The precious metal has traded within a narrow range over the past few months, although market observers, including the wealth management unit of UBS Group, expect further increases.

Gold rose by 1% to $3,375.35 per ounce by 11:03 AM in New York, while the Bloomberg Dollar Spot Index fell.