By Barani Krishnan
Investing.com - Gold prices dipped Monday as optimism over U.S. authorization of a blood plasma treatment for Covid-19 and a relatively firm dollar weighed on safe-haven appetite.
But declines in the yellow metal were capped by concerns that Federal Reserve Chairman Jay Powell will present on Thursday a dour assessment of the U.S. economy at the central bank’s annual Monetary Policy Framework Review amid the coronavirus pandemic. Powell — who will be speaking from home instead of Fed’s typical Jackson Hole, Wyoming, venue for the speech — is expected to make the case for stronger monetary stimulus to help the economy — a dynamic that would clearly weaken the dollar and boost gold.
“For precious metals, the focus shifts to Fed Chair Powell's keynote address on Thursday at the virtual Jackson Hole symposium,” TD Securities said in a note. “As a result of this review, precious metals could find support in a change in forward guidance to make clear that the Fed wants inflation to run above the 2% goal as a make-up strategy.”
The call for a higher inflation strategy wouldn’t exactly be surprising, but gold bulls were still expected to respond enthusiastically to it, the Canadian bank-backed brokerage said.
“While too much of a good thing in gold could still contribute to a deeper pullback in precious metals, the formal announcement could also reinvigorate flows into precious metals, which have slowed substantially following the pullback,” TD Securities said. “Further weakness in the complex would constitute a buying opportunity.”
Benchmark December gold futures on Comex settled down $7.80, or 0.4%, at $1,939.20 per ounce. The high for the session was $1,970.30, while the low was 1,932.50.
The spot price of gold, which reflects trades in bullion, was down $12.33, or 0.7%, at $1,928.03 by 3:00 PM ET (19:00 GMT). Spot gold, which typically trades at a discount to Comex, traded between $1,961.85 and $1,925.73 for the day.