No, we are not in Wyoming. But we have carefully followed the Fed’s key conference in Jackson Hole. What does the recent central bankers’ meeting in Wyoming imply for the gold market?

Why Powell Was Dovish in Jackson Hole

The Fed’s annual Jackson Hole Symposium, entitled this year “Changing Market Structure and Implications for Monetary Policy”, sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, is over. But we can feel its consequences well beyond it. So let’s analyze the latest gathering, starting with the Powell’s speech entitled “Monetary Policy in a Changing Economy” (we will come back to the symposium in the future editions of the Gold News Monitor).

Financial markets considered the Fed Chair’s remarks as dovish. The bond yields declined, while the stock market hit record highs. The reason is that Powell dismissed the risk of overheating. Although inflation has finally reached the Fed’s target, the Fed Chair is not afraid that it could get out of control:

While inflation has recently moved up near 2 percent, we have seen no clear sign of an acceleration above 2 percent, and there does not seem to be an elevated risk of overheating.

Actually, Powell acknowledged that inflation is not the best indicator of economic imbalances. Both the dot-com and the housing bubbles emerged despite the low inflation rate:

Whatever the cause, in the run-up to the past two recessions, destabilizing excesses appeared mainly in financial markets rather than in inflation. Thus, risk management suggests looking beyond inflation for signs of excesses.

Hence, if there is no risk of inflation and the Fed should look beyond the data on consumer prices, the Fed may be less hawkish than it was expected. With the more dovish central bank, gold may catch its breath.

Why Powell Wasn’t Dovish in Jackson Hole