The Daily Market Report: Gold Consolidated Amid Continued Uncertainty About Fed’s Next Move

31-Aug (USAGOLD) — Gold is modestly higher within the recent range amid ongoing uncertainty as to the likelihood of the first Fed rate hike in nearly a decade. FedSpeak out of the Jackson Hole symposium continues to suggest lift-off is coming, but participants remain cryptic when it comes to the timing of such a move.

The absence of inflation is arguably the biggest hangup when it comes to raising rates. “There is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” said Fed Vice Chair Stanley Fischer. It’s good to be optimistic, but it’s not entirely clear what that optimism is based on.

Raising rates before those factors dissipate risks intensifying disinflationary pressures, as well as growth risks, which could lead to the recession that the Fed is so desperate to avoid. In light of this, a September rate hike strikes me as a long-shot.

The extreme market volatility seen last week, further complicates things for the Fed. That actually did more to diminish rate hike expectations than even the dismal Q1 GDP print. There is a pretty broad consensus that a rate hike would lead to further global volatility, and not the “good volatility” associated with sharp stock market gains.

Jobs data for August come out on Friday. There is perhaps some modest downside risk, given the negative trend that has emerged in recent months. Consensus is running about +214k nonfarm payrolls. A sub-200k print would almost assuredly be viewed as the final nail in the coffin for Sep hike, and perhaps the remainder of the year. The jobless rate is expected to tick lower to 5.2%.