Powell's Jackson Hole Shift Sparks Reflation Rally and Asset Repricing

Last week’s market landscape was heavily influenced by Powell’s Jackson Hole speech, signaling a notable shift in Fed stance from targeting 2% inflation to viewing it as a floor, with a focus on unemployment concerns. This pivot spurred a risk-on rally, pushing stocks and precious metals higher while yields and the US dollar declined. The market anticipated a more procyclical US policy pathway, reflecting a cautious reflationary environment increasingly driven by global monetary easing and weakening real rates, favoring high-beta assets like equities and real assets. 

Gold exhibited mixed but notable swings, with historical reactions since 2007 showing no clear pattern in short-term returns, yet experiencing 2-week swings of up to ±5%. The metal’s correlation with Fed rate changes reached 0.53 leading into Jackson Hole, underlining its sensitivity to US monetary policy. Despite some stabilization, the overall tone points to a mildly bullish trajectory with a new 2025 price target averaging $3,200/oz and an upper high estimate of $3,600/oz, driven by ongoing US dollar debasement, inflation hedging demand, and geopolitical uncertainties. 

 Industrial metals showed resilience amid strong macro data releases. Copper, silver, platinum, and palladium prices were supported by tight supply fundamentals, particularly with infrastructure and auto-related demand underpinning platinum and palladium. Silver’s outlook was upgraded, reflecting persistent industrial demand and regional stockpiling amid tariff uncertainties. Oil prices stayed supported on demand optimism, while a cautious outlook remains as policymakers across regions issue new rate decisions and economic data continues to flow, shaping the potential for further reflationary momentum in the coming weeks.