On Wednesday, the precious metals market showed a correction, breaking a streak of five consecutive days of growth. Nevertheless, gold managed to hold above the psychologically important level of $4,600 per ounce, gaining 0.7% during trading. Investors shifted their focus to the upcoming symposium in Jackson Hole, expecting clarity from Federal Reserve (Fed) Chair Kevin Warsh regarding the future of monetary policy.
Fresh inflation data came in above the Fed's target level, strengthening expectations of policy tightening. This, in turn, provided support to the U.S. dollar and Treasury yields, creating moderate pressure on gold prices. However, the current correction looks more like a technical breather than a reversal of the uptrend.
Gold rally: protection against dollar devaluation
Despite the short-term decline, gold has risen by approximately 14% since the beginning of the month. The key driver of this movement has been investor concerns over the growing budget deficit and potential weakening of the dollar. The unexpected intervention by the U.S. Treasury Department in the bond market last week only added fuel to the fire, reinforcing the "devaluation" scenario.
The same scenario has been the catalyst for gold's record rally in 2025, which is the fastest since 1999. The metal has firmly established itself above the 200-day moving average, which many traders view as a bearish signal of a trend change. Inflows into gold ETFs have also resumed: over the week, holdings rose by more than 28 tons—the largest figure since January—reversing a two-month outflow.
Jackson Hole: Warsh's debut under the market's spotlight
The Jackson Hole symposium is an annual platform where central bank leaders often make significant statements. In 2022, it was here that the Fed announced a shift to a hawkish stance. This time, the market awaits Kevin Warsh's debut major speech as chair, scheduled for Friday. He will need to address criticism about the opacity of his views on the economy.
Warsh's rhetoric will be a key trigger for markets. If he takes a "hawkish" course, real yields and the dollar will rise, putting pressure on gold. Conversely, a "dovish" signal will support the current rally, and then the precious metal could update local highs.
My view: The current consolidation of gold above $4,600 is a sign of strength, not weakness. The market is clearly preparing for any scenario, but fundamental factors such as fiscal risks and the structural weakness of the dollar remain in force. Even if Warsh takes a tough stance, it will only be a temporary correction within the long-term bullish trend.