(Kitco News) – The gold market remains under pressure but is still within sight of $ 1,800 an ounce as the Federal Reserve sheds little new light on monetary policy.
As expected, the US central bank on Wednesday left interest rates unchanged at its lower target range of 0.25% to 0%. At the same time, the central bank said the US economy has made some progress, but not enough to justify a change in current monetary policy.
The Fed also said it was continuing to discuss the prospect of reducing its monthly bond buying program.
“Last December, the Committee indicated that it would continue to increase its holdings of treasury securities by at least $ 80 billion per month and agency mortgage-backed securities by at least $ 40 billion. dollars per month until substantial progress is made towards its maximum employment and price stability goals. Since then, the economy has made progress towards these targets, and the Committee will continue to assess progress at future meetings. These asset purchases help promote the proper functioning of the market and supportive financial conditions, thus supporting the flow of credit to households and businesses, ”the statement said.
The gold market takes the lack of new information in stride, with prices only slightly lower in initial reaction. August gold futures traded for the last time at $ 1,793.90 an ounce, down 0.33% on the day.
The central bank has also continued to reiterate its view that rising inflationary pressures will be mostly transitory.
“Inflation has increased, largely reflecting transient factors. Overall financial conditions remain accommodative, partly reflecting policy measures aimed at supporting the economy and the flow of credit to US households and businesses, ”the statement said. “The trajectory of the economy continues to depend on the evolution of the virus. Advances in immunization are likely to continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain. “
Some analysts note that the statement could have a somewhat hawkish slant as it prepares markets for possible tightening.
“It’s definitely a tiptoe point towards a narrowing and a bit of a surprise,” said Adam Button, chief currency strategist at Forexlive.com.
CIBC senior economist Avery Shenfeld also said the latest monetary policy statement was hawkish, “given that the Fed has not added any caveats to the outlook for the Delta variant.”
Shenfeld added that the markets will have to wait a bit longer before obtaining further guidance on monetary policy.
“Keep in mind that the Fed won’t update its forecast until September, so this meeting is unlikely to be very decisive in terms of further thinking about the outlook or the policy response. If, as we expect, the economy and labor market continue to improve, the September meeting will be more likely to be used as a formal warning of tapering in early 2022.
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