Gold strengthened 0.6% to US$3,359/oz in the US session on Friday (August 22nd), as the dollar weakened after Fed Chairman Jerome Powell opened the door to a September interest rate cut. Sentiment turned positive for the precious metal as the prospect of lower interest rates typically reduces the opportunity cost of holding gold.

In his Jackson Hole speech, Powell emphasized that unemployment is stable but risks to the labor market are rising. He stated that policy remains in restrictive territory, so "the underlying outlook and shifting balance of risks may require adjustments" to the policy stance, while emphasizing that the Fed will proceed cautiously.

The market reaction was swift: bets for a 25 bps September cut increased, pushing the Bloomberg Dollar Index lower and strengthening gold's appeal. Essentially, the prospect of easing → yields & USD fall → gold is helped.

Although Powell opened the door to easing, he acknowledged that inflation concerns have not disappeared. The Fed must balance its dual mandate—price stability and employment—amid changing trade, tax, and immigration policies that influence the outlook.

Source: Newsmaker.id