As Federal Reserve Chairman Jerome Powell signaled that the central bank is prepared to begin easing interest rates, the gold market traded at intraday highs.

Powell delivered his much-anticipated speech at the Jackson Hole Central Bank Symposium, stating that the upside risks to inflation have diminished, and the risks to the labor market have increased.

He said in his speech: "The time has come to adjust policy.

The direction forward is clear; the timing and pace of rate cuts will depend on forthcoming data, evolving prospects, and the balance of risks."

The gold market saw significant buying in its initial reaction to Powell's remarks.

December gold futures last traded at $2,551.60 per ounce, up more than 1% for the day.

Advertisement

Analysts described Powell's comments as "unquestionably" dovish.

However, much of his speech focused on the reasons behind the push to a 40-year high in inflation in 2022 and the subsequent decline.

Despite the containment of rising inflation risks, Powell noted that the central bank will continue to monitor economic conditions.

He also expressed optimism that the central bank can suppress inflation while supporting the economy and labor market.

He said: "By appropriately easing policy constraints, we have ample reason to believe that the economy will return to a 2% inflation rate while maintaining a strong labor market."

"Our current policy interest rate levels give us enough room to deal with any risks we may face, including the risk of further weakness in labor market conditions."

Some analysts pointed out that although Powell indicated that the Fed will not rush into the current easing cycle, the market is still trying to get ahead of the Fed.

The market is pricing in a more than 32% chance of a 50 basis point fluctuation in September.

The market has begun to price in a 150 basis point easing policy for this year, with only three meetings left.

Some analysts said that as these aggressive market expectations are cut, the gold market may experience some volatility.

Stephen Brown, Deputy Chief Economist for North America at Capital Economics, said that further weakness in the U.S. labor market may force the Fed to meet the market's aggressive expectations.

He said: "If the unemployment rate rises further, then the Fed may cut rates by 50 basis points at the policy meeting on September 17th to 18th."

"After the next meeting, we have little to guide our policy direction, although today's dovish tone suggests that our forecast of a 25 basis point cut at each meeting may be the minimum we can expect."