The yellow metal continues to hold the key level of $4,600 per ounce despite corrective pressure. Over the past 24 hours, quotes have gained 0.7%, partially recovering lost ground. Investors prefer to take a wait-and-see stance, locking in profits ahead of the week's main macroeconomic event—the Federal Reserve Chair's speech at the Jackson Hole symposium.
Wednesday marked the first day of decline after an impressive five-day winning streak. Fresh inflation data, which again came in above the Fed's target level, reinforced expectations of further monetary policy tightening. This, in turn, supported the dollar and Treasury yields, which traditionally puts pressure on precious metals.
Rally on Devaluation Fears
However, it is premature to talk about a trend reversal. Since the start of the month, gold has risen by roughly 14%, and the current correction looks quite healthy. The key driver of the rally remains investor concern over the growing budget deficit and the prospects of a weaker dollar. The U.S. Treasury's unexpected intervention in the bond market last week only amplified these sentiments.
The market has again returned to the "devaluation" scenario, as confirmed by record capital inflows into safe-haven assets. Based on my estimates from fund flow data, gold ETF holdings rose by more than 28 tons over the week—the highest figure since January. Notably, we saw sustained outflows from these funds as recently as early summer, but the shift in sentiment has been swift.
Warsh's Debut: What to Expect from the First Big Speech
The Jackson Hole symposium is an annual platform where central bank leaders often announce significant policy changes. Suffice it to recall that it was here in 2022 that the Fed announced its shift to a hawkish course.
On Friday, Chair Kevin Warsh will deliver his first major speech in his new role. The market expects clarity from him on next steps in the fight against inflation. Warsh could either tighten rhetoric, confirming a "hawkish" stance, or soften it, giving markets reason for optimism. In the first case, we would see rising real yields and a stronger dollar, which would pressure gold. In the second, the precious metal would gain fresh momentum to update local highs.
My view: Given persistent fiscal risks and the structural weakness of the dollar, any gold corrections are likely to be bought up. The $4,600 level serves as solid support, and even a "hawkish" scenario is unlikely to knock out the upward momentum for long. The medium-term target around $4,800 remains in place.