Gold: Inflation Re-ignition is Coming

Fed cuts are a catalyst, not a cause

“Gold is rising not because rates will fall, but because they are expected to fall too soon.”

Fed Pivot, Bonds, and Gold’s Real Driver

Topics: 
1-Powell’s Dovish Turn 
2-Immediate Market Impact 
3-Geopolitical Drivers of Gold Liquidity and Seasonal Pressures 
4-The Bond Market’s Warning 
5-Why Gold Is Rallying 
6-Bottom Line: 
7-Going Forward

Powell’s Dovish Turn

Last month’s disappointing unemployment numbers, along with the downward revision of second-quarter data, shifted Jerome Powell’s stance at Jackson Hole. His comments revealed a dovish pivot that gave priority to employment over inflation. The Fed’s dual mandate has therefore tilted toward addressing labor market weakness.

A key element of this pivot was the quiet abandonment of the Flexible Average Inflation Targeting (FAIT) framework, introduced in 2020. By moving away from averaging inflation at 2 percent, the Fed has effectively raised its tolerance level. “Three percent is now functioning as the new two percent.”

Immediate Market Impact

Markets responded immediately. Gold and silver rallied strongly, and investors interpreted Powell’s comments as a green light for rate cuts of 25 to 50 basis points. American buying returned aggressively in anticipation, and precious metals benefited from the perception that lower interest rates provide support for non-yielding assets.