A slight decline in gold at the beginning of the week
Gold prices witnessed a slight decline at the beginning of trading on Monday, as the ounce approached the level of 3360 dollars, after rising more than 1% in the previous session.
This rise followed an apparent shift in the tone of Fed Chairman Jerome Powell towards a more accommodative monetary policy.
Is this retreat considered temporary?
It seems that this decline is only a natural technical correction after the strong rise that gold experienced last Friday.
It is seen as an outlet that enables the yellow metal to gather strength in preparation for continuing its upward march during the coming period, especially under the supporting fundamental factors.
Powell's signals push markets towards expectations
Jerome Powell's speech at the Jackson Hole seminar overshadowed the scene, as he noted the possibility of lowering interest rates in the near future.
He explained that despite the decline in unemployment, labor market risks are increasing, and monetary policy remains restrictive, which opens the door to possible adjustments.
How markets responded ?
The markets response was quick and decisive, with interest rate futures now pricing in an almost complete cut of 25 basis points at the upcoming September meeting.
CME Group's FedWatch Tool shows an 87% forecast for a quarter-point cut in September, with total cuts expected by about 48 basis points by the end of the year.
Why gold may benefit?
Gold benefits greatly from the low interest rate environment, as it reduces the opportunity cost of owning the non-yielding metal, making it more attractive compared to other income-generating assets such as bonds.
Geopolitical tensions: additional support
Along with monetary factors, the growing escalations between Russia and Ukraine strengthen the attractiveness of gold as a traditional safe haven.
In a defiant speech, Ukrainian President Volodymyr Zelensky vowed to continue defending his country. His comments came in response to Moscow's claims that Ukraine has targeted Russian energy facilities, including a fire at the Kursk nuclear plant, exacerbating tensions and pushing investors towards safe havens.
