On Wednesday, gold broke its five-day winning streak but managed to hold the key psychological level of $4,600 per ounce. The metal rose 0.7%, partially recovering from a recent correction. Investors are now in wait-and-see mode, carefully analyzing every macroeconomic signal ahead of the Federal Reserve Chair's speech at the annual Jackson Hole symposium.
The latest inflation report showed that price growth rates once again exceeded the Fed's target level. This predictably strengthened "hawkish" sentiment in the market, supporting the dollar and Treasury yields, which puts short-term pressure on the precious metal.
Rally amid devaluation risks
However, despite the current correction, gold's upward trend is impressive. Since the start of the month, the metal has gained about 14%, posting its best performance since 1999. The key driver of this rally was the U.S. Treasury Department's unexpected intervention in the bond market last week. This move has reignited the "devaluation" scenario: investors are actively buying hard assets, fearing a growing budget deficit and a weakening dollar.
The technical picture also confirms a shift in sentiment. The price has firmly settled above the 200-day moving average, which many traders perceive as a signal of a long-term trend reversal. Inflows into gold ETFs over the past week exceeded 28 tonnes, the highest level since January. This points to the return of institutional demand, which had previously shown outflows for two months.
Warsh's debut: stakes are high
The Jackson Hole symposium is not just an annual gathering of central bank heads. It was here in 2022 that the Fed announced its shift to tight monetary policy. Now all eyes are on Chair Kevin Warsh, who is set to deliver his first major speech in this role on Friday. He will need to address criticism regarding the opacity of his economic views.
If Warsh intensifies "hawkish" rhetoric, we could see a rise in real yields and the dollar, which would pressure gold. Conversely, any "dovish" signal hinting at a pause in tightening would act as a catalyst for a new leg of the rally and fresh local highs.
My view: The market is at a bifurcation point. Fundamental factors such as fiscal risks and central bank demand remain extremely positive for gold. However, short-term dynamics will depend entirely on the Fed's rhetoric. Investors should prepare for heightened volatility, and any price drop in the event of "hawkish" comments could become an attractive entry point for medium-term positions.