Gold prices hover near record highs after Powell's caution on interest rate cuts

Gold (GC=F)

Gold futures (GC=F) dipped 0.3% to $3,803.60 per ounce on Wednesday morning, but remained near their peak, while spot gold edged 0.2% higher to trade at $3,687.86 per ounce.

Matt Britzman, a senior equity analyst at Hargreaves Lansdown, said: "Gold is hovering near record highs as investors weigh mixed signals from the Fed on inflation and jobs."

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In a speech on Tuesday, US Federal Reserve chairman Jerome Powell said there was "no risk-free path" for the central bank's next policy move as inflation remains elevated and the job market weakens.

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It's "a challenging situation," Powell said during a speech in Rhode Island on Tuesday, reiterating that the Fed must balance its dual goals of maximum employment and price stability.

In addition, Powell indicated that equities were "fairly highly valued".

Britzman said: "Powell’s cautious tone was echoed by divided views across the committee, keeping rate cut expectations alive ahead of August’s PCE print, the Fed’s preferred measure of inflation. Add in rising geopolitical tensions and strong ETF inflows, and gold’s appeal is holding firm despite the policy fog."

COMEX - Delayed Quote•USD

(GC=F)

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3,800.20

-15.50

(-0.41%)

As of 5:56:41 AM EDT. Market Open. Advanced Chart

Oil (BZ=F, CL=F)

Oil prices were little changed on Wednesday morning, as investors weighed inventory data and geopolitical developments.

Brent crude (BZ=F) futures traded at $66.90 per barrel at the time of writing, while West Texas Intermediate futures (CL=F) changed hands at $63.36 a barrel.

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"Oil prices spiked yesterday, reversing earlier weakness after a sharp draw in US inventories and stalled Kurdish exports reignited supply fears," said Britzman.

"It’s a pivot from the oversupply concerns that weighed on prices earlier in the week, highlighting just how choppy the oil narrative has become. With geopolitical risks still simmering, the market remains caught between disruption-driven rallies and demand-side doubts."

NY Mercantile - Delayed Quote•USD

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67.31

+0.34

+(0.51%)

As of 5:54:18 AM EDT. Market Open. Advanced Chart

Pound (GBPUSD=X, GBPEUR=X)

The pound fell 0.3% against the dollar (GBPUSD=X), to trade at $1.3484 at the time of writing, as a stronger greenback weighed on sterling in the wake of Powell's cautious comments on rate cuts.

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, was up 0.3% at 97.57 at the time of writing.

Francesco Pesole, FX strategist at ING, said: "Fed chair Jerome Powell broadly reiterated his cautious view yesterday, signalling there is some balance between downside employment risks and upside inflation risks.

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"The dollar broadly stabilised yesterday. The US composite index dropped more than expected, one full point to 53.6. This is still a respectable figure and probably indicates that concerns are somewhat isolated to the job market rather than broader business sentiment.

"We retain a moderate bearish bias on the dollar this week, although a quiet day for data and Fedspeak today (only Mary Daly is due to speak) means we could see FX volatility ease further and the dollar hover close to the current level in most G10 crosses," he added.

In other currency moves, the pound was little changed against the euro (GBPEUR=X) trading at €1.1444 at the time of writing.

More broadly, the FTSE 100 (^FTSE) fell 0.2% to trade at 9,206 points on Wednesday morning. For more details on market movements check our live coverage here.

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