Gold and Silver Rally As Powell Announces ¨The Time Has Come¨

The big event on Friday was Federal Reserve chairman Jerome Powell's speech at Jackson Hole. Where he did not officially commit to a rate cut in September, but telegraphed about as subtly as he could that the cuts are on the way.

“The time has come for policy to adjust,” Powell said in his speech at the Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

By the end of trading on Friday the Futures markets were pricing in a 63.5% chance of a 25 basis point cut in September, and a 36.5% chance of the Fed cutting 50 basis points by their next meeting.

The futures markets were also pricing in an even more aggressive sequence of cuts at the subsequent meetings.

In response, the gold price rallied $30 on Friday, with the December futures closing at $2,546. Within shouting distance of the $2,570 intraday high set earlier this year.

Meanwhile the silver price was sharply higher as well, rallying almost 3% to close just under the $30 mark at $29.86.

We mentioned a few weeks ago that the rate cuts, or even the anticipation of rate cuts, could well be what finally brings the western institutional funds back into the market. And the latest data shows that the shift has begun.

Inflows into gold ETFs and funds (this data also includes COMEX holdings) have picked up since June, after 2 years of steady outflows.

This uptick suggests that gold is regaining its appeal as a safe haven. Institutions appear to be positioning themselves for potential market changes.

As economic conditions remain uncertain, gold's role in portfolios may continue to grow. The recent inflows could mark the beginning of a renewed interest in the metal.

(the blue line represents the amount of gold held in these funds)

In silver we’ve seen a similar trend of inflows in recent months, although with a more volatile trajectory.

So the institutional shift into precious metals ahead of the rate cuts has begun. 

And following Powell’s Jackson Hole speech on Friday, the markets are betting that the rate cuts are now less than a month away.

With the silver price still under $30, take advantage of this week’s silver special on 1 ounce Silver Philharmonics for only $3.10 over spot!

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