25.10.202111:40 Forex Analysis & Reviews: Powell talks about lower inflation, and gold follows him

Friday's comments by Chairman Jerome Powell had an active impact on gold. In a short period of time, the yellow metal peaked above the level of $ 1815 and then returned to its previous level.

Jerome Powell's statement also alarmed stock traders as the Fed chairman discussed the stimulus cuts and upcoming changes to their extremely flexible monetary policy. Regarding the reduction, Jerome Powell said that the US Central Bank is on the right track.

The US regulator concluded that the Federal Reserve is ready to use interest rate hikes to combat inflationary pressures, adding that inflation is still at risk of rising for a longer period than initially assumed.

He also noted that before using their instruments to reduce inflation, they should make sure that their policies allow for adjusting a number of possible outcomes.

Despite the fact that rising inflation continues to strongly support the pricing of gold:

So it is for silver:

The final steps that the Federal Reserve is going to take to limit or contain inflationary pressures have the opposite effect.

In fact, not all analysts are convinced that Powell and the US Central Bank will manage to cope with growing inflation expectations.

According to Daniel Pavilonis, a senior commodities broker at RJO Futures, rising yields may indicate that inflation expectations are becoming unfounded, and given that economic activity is starting to slow down, the Fed will have limited tools.

On the other hand, Wilshire Phoenix's managing partner Wade Guenther said inflation is being driven by an ongoing supply chain disruption for the time being. He added that the supply crisis could last longer than originally anticipated. Accordingly, inflation will remain high.

Powell, in turn, noted that the risk of inflation is growing due to disruptions in the supply chain. This could keep inflation at a high level until 2022. Also, according to him, supply problems should be eliminated in the baseline scenario, and inflation will decrease to 2%.

Although inflationary pressures continue to support gold prices, analysts note that the dynamics have changed slightly as the precious metal faces new competition, especially from Bitcoin. Nevertheless, economists believe that the bitcoin ETF, which adds legitimacy to the digital currency market, does not significantly change the rules of the game for gold.

Stock markets, which are trading near record highs, are also strong competition for gold.