Gold rebounds with optimism

Gold was able to reduce some of the losses it suffered yesterday and is holding above the $2,490 per ounce level in spot transactions.

Gold’s gains come with the momentum surrounding Jerome Powell’s speech today in Jackson Hole with bets on more soft signals from the Federal Reserve Chairman about cutting interest rates this year. Markets are also watching what will come out of the ceasefire negotiations in Gaza today in light of the prevailing negativity surrounding them.

I believe that Powell’s speech about the coming period will not go beyond next September – the expected date for the start of the interest rate cut path. However, markets are already betting on this date and have already priced in based on that, especially the hypothesis of a 25-basis point cut and do not expect the possibility of hold rates at all. Therefore, Powell must come up with words that reinforces this bet, otherwise the lukewarm tone may have negative results for gold.

Markets are pricing in a 74.5% chance of a 25-basis point cut in September, versus a 26.5% chance of a half-point cut and a full point cut by the end of the year, according to the CME FedWatch Tool.

We are also waiting to see what the ongoing negotiations in Cairo on a ceasefire in Gaza will lead to. These negotiations, which Hamas is not attending, are clouded by pessimism about their ability to achieve a real breakthrough that could dispel fears of a wider regional war, which in turn helps keep gold’s upward momentum intact.

Israel is still clinging to its military presence in Gaza, with Hamas not receiving guarantees to prevent this, especially along the southern border axes in Netzarim and Philadelphi. The presence in the latter not only generates Hamas’s rejection of any agreement, but it also contradicts the demands of one of the key mediators, Egypt. This in turn puts more obstacles in the way of reaching an agreement, according to The Wall Street Journal. All this comes with the constant pessimistic statements being published by the media from Hamas, mediators, and US and Israeli officials themselves about the feasibility of the negotiations.