Gold surged to $3,417 per ounce while stocks soared following Federal Reserve Chair Jerome Powell's carefully calibrated Jackson Hole speech that opened the door to a September rate cut while warning of "challenging" economic conditions ahead. In his final appearance at the Wyoming symposium as Fed chair, Powell acknowledged that "the effects of tariffs on consumer prices are now clearly visible" and warned that "downside risks to employment are rising," sending markets into a buying frenzy with the Dow Jones jumping 680 points (1.5%) and gold breaking through resistance levels. Markets are now pricing an 87% probability of a quarter-point rate cut at the September 16-17 FOMC meeting, up from 75% before the speech, as traders bet the Fed will pivot to support a weakening labor market despite inflation running at 2.6% - well above the central bank's 2% target.

Breaking: Powell signals policy shift as markets rally

Federal Reserve Chair Jerome Powell delivered his most consequential Jackson Hole address this morning, stating that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance" - language that sent immediate shockwaves through financial markets. The speech marked a notable shift from Powell's hawkish July FOMC tone when he characterized the labor market as "solid," to today's acknowledgment that employment risks could "materialize quickly in the form of sharply higher layoffs and rising unemployment."

The market response was swift and decisive. Gold futures spiked from an opening price of $3,383.30 to current levels of $3,417, marking a 1.95% gain on the day and the highest level since the April 2025 peak of $3,499.88. The broader equity markets surged with the S&P 500 climbing 1.3% and the Nasdaq Composite gaining 1.35%, while Treasury yields plummeted as bonds rallied on rate cut expectations. The dollar index weakened further to 98.45, extending its worst performance in over 50 years.

Crucially, Powell addressed the elephant in the room - tariffs - stating that "higher tariffs have begun to push up prices in some categories of goods" and that the Fed expects these effects to "accumulate over the coming months" with "high uncertainty about timing and amounts." This acknowledgment comes as President Trump continues to pressure Powell for aggressive rate cuts, though the Fed chair maintained his independence by emphasizing the central bank's data-dependent approach rather than bowing to political pressure.

Precious metals surge on dovish pivot despite mixed signals

The precious metals complex experienced divergent performance following Powell's speech, with gold and silver surging while platinum and palladium faced industrial demand concerns. Gold's climb to $3,417 represents a critical breakout above the $3,400 psychological resistance, with trading volumes on COMEX spiking to over 450,000 contracts - nearly double the daily average. Silver rallied to $38.85, gaining 1.25% as the metal benefits from both monetary and industrial demand drivers, though it remains well below April's 13-year high near $40.

The gold-silver ratio tightened to 87.9:1, down from yesterday's 92:1, suggesting early rotation into silver as traders position for potential outperformance during the next leg of precious metals strength. Physical demand indicators show continued tightness with American Gold Eagles commanding premiums of $150-180 over spot - the highest levels since 2020 - while silver eagles trade at $8-10 premiums despite increased U.S. Mint production. LBMA settlement delays persist at T+6 weeks, indicating genuine physical scarcity rather than paper market dynamics.

Platinum's sharp 5.59% decline to $1,375 and palladium's 9.19% drop to $1,157 reflect concerns about industrial demand amid global manufacturing weakness and accelerating electric vehicle adoption. The divergence between monetary metals (gold/silver) and industrial precious metals (platinum/palladium) highlights the market's focus on monetary policy and safe-haven demand over industrial consumption patterns. ETF flows turned decisively positive with SPDR Gold Trust (GLD) recording its largest single-day inflow in six months at $487 million.

Technical analysis shows gold breaking out as silver coils

Gold's decisive breakout above $3,400 psychological resistance on record volume confirms a significant technical shift in market structure. The RSI surge from yesterday's neutral 47.8 to today's 62.3 reflects powerful momentum without reaching overbought extremes above 70, suggesting room for continued upside. The MACD indicator flipped decisively positive at 18.75, generating its strongest buy signal since February's rally. Critical support now emerges at the former resistance level of $3,400, with the 50-day EMA at $3,365 providing secondary support. The measured move projection from the consolidation pattern targets $3,520, just above the April all-time high.

Silver's technical picture improved dramatically with the metal reclaiming the $38.85 level and pushing RSI from yesterday's deeply oversold 24.84 to a more neutral 45.2. The metal faces immediate resistance at the 50-day moving average of $39.15, with a break above potentially triggering acceleration toward the psychological $40 level. The developing inverse head and shoulders pattern on the 4-hour chart projects targets near $41.50 if neckline resistance at $39.15 clears. Volume patterns show accumulation with today's 185,000 contracts representing the highest daily volume since April's peak, suggesting institutional positioning ahead of the anticipated Fed pivot.

Labor market weakness forces Fed's hand despite inflation concerns

The catalyst for Powell's dovish shift became clear as he acknowledged the shocking July employment report that showed just 73,000 jobs added versus 110,000 expected, with May and June revised downward by a combined 258,000 positions. The three-month average of job gains collapsed to merely 35,000 - the weakest pace since the pandemic recovery began. Powell warned that employment risks "can materialize quickly in the form of sharply higher layoffs," marking a dramatic departure from his July characterization of a "solid" labor market.

The Fed finds itself in what economist Will Denyer called "a pickle," balancing persistent inflation running 60 basis points above target against rapidly deteriorating employment conditions. Powell acknowledged this challenge, stating the Fed faces a "challenging situation" as tariff-driven price increases coincide with labor market weakness. The Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation gauge, accelerated from 2.1% in April to 2.6% in June, with August data due next Thursday expected to show further acceleration due to tariff pass-through effects.

Central banks accelerate gold accumulation amid policy uncertainty

Central bank gold demand shows no signs of abating, with Q1 2025 purchases of 244 tonnes marking the highest first-quarter accumulation on record. The World Gold Council projects full-year purchases will exceed 900 tonnes for the fourth consecutive year, with 43% of central banks surveyed planning to increase allocations over the next 12 months. China's official reserves rose to 2,292 tonnes, though analysts estimate actual holdings exceed 5,000 tonnes when including State Administration of Foreign Exchange positions and commercial bank holdings under government direction.

The unprecedented dissent at July's FOMC meeting, where governors Michelle Bowman and Christopher Waller voted for immediate rate cuts - marking the first multiple-governor dissent since 1993 - underscores the internal Fed divisions Powell must navigate. Boston Fed President Susan Collins stated today she's "not yet ready to cut," while Atlanta's Raphael Bostic expressed concerns about premature easing reigniting inflation. This lack of consensus, combined with Trump's public attacks calling Powell a "total loser" and demanding his resignation, creates additional uncertainty supporting safe-haven demand for precious metals.

Investment positioning for the Fed pivot era

Today's market action confirms the beginning of a new phase in precious metals as the Fed prepares to pivot from its hawkish stance. The combination of 87% probability of a September rate cut, weakening employment, and persistent inflation creates the ideal "goldilocks" scenario for precious metals - monetary easing amid currency debasement concerns. J.P. Morgan Research maintains their bullish outlook with Q4 2025 targets of $3,675 for gold and expectations of $4,000 by mid-2026, citing continued central bank demand and "optimal hedging for stagflation, recession, and debasement risks."

Near-term catalysts include the August PCE inflation report on Thursday, August 29, which could show further tariff pass-through effects, and the September 5 employment report that will likely determine whether the Fed cuts 25 or 50 basis points. Technical traders should use any pullback to the $3,400 level in gold as accumulation opportunities, with stops below $3,380. Silver's test of 50-day resistance at $39.15 represents a critical juncture - a break above would target the psychological $40 level and potentially $42 based on the cup and handle pattern completion.

The gold-silver ratio compression from 92:1 to 87.9:1 suggests early rotation into silver, historically a leading indicator of sustained precious metals rallies. Investors should consider 15-20% portfolio allocation to precious metals split 60/40 between gold and silver, with platinum offering contrarian value for risk-tolerant investors at decade-low valuations relative to gold. The Fed's "challenging situation" of balancing employment and inflation concerns virtually guarantees increased volatility and policy uncertainty through 2026, creating an exceptionally favorable environment for precious metals outperformance as traditional 60/40 portfolios face headwinds from stagflationary pressures.