The word of Jerome Powell, the president of the US Federal Reserve (the Fed), is worth gold – literally. The price of the precious metal was once again on fire in anticipation of the conference in Jackson Hole, Wyoming, that began on Thursday, August 22. At this meeting, which is considered an important event for central bankers, the great financial oracle was due to speak. To say that Powell's statements were eagerly awaited would be putting it mildly.
Already, on Monday, August 19, the 31-gram ounce had broken the symbolic $2,500 (€2,230) barrier, breaking a historic record – but not for long. The following day, it closed at $2,514, after having passed $2,530 during the session. After that, the fever subsided somewhat.
But on Friday, August 23, the day of Powell's speech, gold climbed back above $2,500 an ounce. Compared with its price at the beginning of January, this represents an increase of over 20%.
Irresistible ascent
In fact, the precious metal has been booming since the end of 2023. Since then, it has begun an irresistible ascent, flying from one record to to the next. This surge has been regularly fueled by Powell's words, but also, and perhaps above all, by investors' anticipations of his future pronouncements. There is a single nagging theme, of course – interest rate cuts – but a multitude of possible conjectures on the timing and pace of the decrease.
"The time has come for [monetary] policy to adjust," Powell ultimately declared, thereby paving the way for a possible first rate cut at the institution's next meeting, scheduled for September 17-18. This prospect has sent the greenback plummeting and gold soaring sky-high. All the more so since a lower cost of money favors gold, which pays no interest. "The combination of a lower dollar and lower Treasury yields," safe-haven assets traditionally competing with gold, continues to support its price, Saxobank analyst Ole Hansen told Agence France-Presse.
Friday's confirmation that these omens are likely to materialize in September further strengthened its upward trajectory. And the latest US employment data, proving that growth in demand for labor is weaker than expected, lends credence to this change in trend for rates. Markets are now speculating on the extent of the decline. They are betting on a one-point decline by the end of the year, with the first stage marked by a quarter-point drop in the autumn.
Geopolitical tensions
But there are other reasons that can explain this surge in the price of gold. In particular, geopolitical tensions have reinforced gold's status as a safe-haven asset. In the Middle East, the war that broke out between Israel and Hamas in the autumn of 2023 has continued, even as talks are underway in Cairo for a possible ceasefire in Gaza. And the fear of the conflict spreading to neighboring countries remains strong.
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