The big event on Friday was Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole. While he did not officially commit to a rate cut in September, he hinted as subtly as possible that rate cuts were on the way.
“It is time to adjust policy,” Powell said in his speech at the Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the allocation of risks.”
By the close of trading on Friday, futures markets were pricing in a 63.5 percent probability of a 25 basis point rate cut in September and a 36.5 percent probability that the Fed would cut rates by 50 basis points by its next meeting.
The futures markets also expected an even more aggressive sequence of interest rate cuts at the following meetings.
In response, gold prices rose $30 on Friday, with December futures closing at $2,546, within striking distance of the intraday high of $2,570 reached earlier this year.
Meanwhile, the price of silver also rose significantly, increasing by almost 3% and closing just below the $30 mark at $29.86.
We mentioned a few weeks ago that the rate cuts, or even the expectation of rate cuts, could be the reason why Western institutional funds are finally returning to the market. And the latest data shows that this change has already begun.
Inflows into gold ETFs and funds (this data also includes COMEX holdings) have increased since June after two years of steady outflows.
This uptrend suggests that gold is becoming more attractive as a safe haven asset. Institutions appear to be positioning themselves for potential market changes.
As the economic situation remains uncertain, gold’s role in portfolios could continue to grow. Recent inflows could mark the beginning of renewed interest in the metal.
(the blue line represents the amount of gold held in these funds)
In silver, we have observed a similar inflow trend in recent months, albeit with a more volatile development.
The institutional shift into precious metals ahead of the interest rate cuts has therefore begun.
And after Powell’s speech in Jackson Hole on Friday, markets are now expecting interest rate cuts to occur in less than a month.
With silver prices still below $30, take advantage of this week’s silver special offer: 1 ounce Silver Philharmonic for only $3.10 above spot price!
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