In response to Federal Reserve Chairman Jerome Powell’s failure to provide a clear timeline for tapering U.S. stimulus spending at the much-anticipated Jackson Hole monetary policy symposium, gold hit 3-week highs on Friday, notching its best weekly gains since May.
Stocks, commodities, including oil, and the dollar tumbled as risk assets rocketed higher. The yellow metal has also been riding high since inflation is a major driver of the yellow metal’s price.
Comex gold closed at $1,819.50 an ounce, up $24.30, or 1.4%, after reaching $1,821.55 a three-week high. The week-to-week increase was around 2%, which is its highest rate since mid-May.
The gold rally came after Powell said the United States was on solid footing, but still vulnerable to threats from the Coronavirus pandemic.
During his opening speech at the Jackson Hole Symposium, the Fed chair said that although he initially intends to taper by the end of the year, the spread of the Delta variant of the pandemic has caused him to think differently.
“Compared to 2009, inflation has shown ‘substantial further advances.’ In addition to progress in the Fed’s twin goals, the job market has become more balanced,” he said.
But Powell also hedged the central bank’s position on the taper by saying it will be “carefully assessing incoming data and the evolving risks.”
“Our elevated holdings of longer-term securities will continue to support accommodative financial conditions even after our asset purchases end,” he added.
As part of its efforts to protect the U.S. economy from the effects of the Coronavirus pandemic, the Fed has been buying at least 80 billion dollars in Treasury bonds and 40 billion dollars in agency mortgage-backed securities each month since March 2020. Likewise, the Fed keeps interest rates between 0 and 0.25 percent, a record low.
On Thursday, economists estimated that growth for the second quarter of 2021 will be 6.6% – well above the 3.5% decline seen throughout 2020 due to the Federal Reserve’s stimulus program. Its own projections for 2021 indicate the economy will grow by 6.5%