Gold Prices Near All-Time Highs Ahead of Jerome Powell’s Testimony – What’s Next?

Gold’s Perfect Storm: Record Highs Imminent Amid Fed’s Uncertainty

There is no denying that the current macroeconomic backdrop is fuelling a “perfect storm” for Gold and cementing expectations that prices are now firmly on track to score a new all-time record high!

And that could happen by the end of this week, if not sooner.

The major market-moving event that traders will be watching closely for clues on Gold’s next big move will be the outcome of Federal Reserve Chairman Jerome Powell’s two-day testimony before Congress starting on Wednesday.

The Federal Open Market Committee has held interest rates at a two-decade high since July, leaving the outlook for the Fed’s policies cloudier than at any time since it began hiking rates back in March 2022.

As a result, the past several months have seen a changing dynamic between financial markets and the Federal Reserve over the pace and timing of interest rate cuts this year.

Since the Federal Reserve’s policy meeting in January, Jerome Powell has flipped the script – citing that policymakers need more evidence to be sure inflation is heading back down towards their 2% target and once they get there, they’re likely to bring rates down.

While it’s understandable, that officials don’t want to cut rates too soon and reignite inflationary pressures – an extremely costly mistake that forced the Fed in the 1970s to raise rates much higher, ultimately triggering a painful recession.

Fed’s Election Timing Risk: Potential Black Swan for Markets

On the flipside, this approach also presents the Fed with a big problem.

The longer the Fed waits, the closer any rate cut will be to the November presidential election, which is all but certain to be a rematch between President Joe Biden and former President Donald Trump.

According to analysts at GSC Commodity Intelligence – a Trump-Biden rematch will inevitability set the stage for one of the most volatile elections in modern history. If the Fed makes their more too close to the presidential election – this potentially could unleash more volatility than the markets can handle – opening the door to a ‘black swan’ event.

Over the next two-days, the House and the Senate committees will grill Jerome Powell over the Federal Reserve’s decision to push back rate cuts and keep interest rates higher for longer.

He may also face questions about comments made by Fed Governor Christopher Waller hinting that he would like to see the Central Bank revive ‘Operation-Twist’.

Comments, which have since ignited a scorching rally sending Gold prices to the highest levels seen in 2024 – surging over 30% from their 2022 lows of $1,600 an ounce.

And the rally might not stop there!