Gold struggles to hold onto gains as Fed plans to buy bonds by year-end – FOMC minutes – .

Gold struggles to hold onto gains as Fed plans to buy bonds by year-end – FOMC minutes – .

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Editor’s Note: The prices listed in the article have been updated to reflect renewed selling pressure.

(Kitco News) – Gold prices retreat to $ 1,800 an ounce as the Federal Reserve advances in negotiations to cut its monthly asset purchase schedule, according to policy meeting minutes July currency.

The minutes show that the central bank is increasingly in favor of reducing its purchasing programs by the end of the year.

“They generally felt that the committee’s standard of ‘substantial progress’ towards maximum employment and inflation targets had not yet been met, particularly with regard to labor market conditions, and that risks to the economic outlook remained, ”the minutes said. “Most participants expected that the economy would continue to move towards these goals and, provided the economy developed broadly as expected, they believed that the standard set out in the Committee’s guidance on procurement of assets could be reached this year. “

“Some participants suggested that it would be prudent for the Committee to prepare to start reducing its pace of asset purchases fairly quickly, in light of the risk that recent high inflation readings may prove to be more persistent. than they anticipated and because starting earlier to reduce asset purchases would most likely allow additions to securities holdings to be concluded before the committee deems it appropriate to increase the federal funds rate ” , also indicates the minutes.

The gold market moved into positive territory in initial reaction to the minutes. December gold futures last traded at $ 1,791.30 an ounce, up 0.20% on the day.

While discussions of the potential reduction continue to advance, the minutes also reflect lingering concerns about the health of the U.S. economy, particularly as the country faces an increase in infections of the COVID-19 variant. Delta.

“Discussing the uncertainty and risks associated with the economic outlook, many participants noted that the uncertainty is quite high, with the slowdown in vaccine progress and the developments surrounding the Delta variant posing downside risks to vaccinations. economic outlook, ”the minutes said.

The committee was also concerned that upward inflationary pressures may not be as transient as expected.

“Some participants noted that there were upside risks to inflation associated with fears that supply disruptions and labor shortages may persist longer than expected and could have larger effects. or more persistent on prices and wages than they currently assumed, ”the minutes said.

While discussions on lowering interest rates are on the table, the committee noted that they are separate from any potential hikes in interest rates. The committee noted that the timing of any potential rate hikes would depend on the health of the economy.

CIBC senior economist Katherine Judge said the minutes show market participants might expect to see more detailed reduction plans at the September monetary policy meeting.

“Overall, with participants pledging to provide advanced advice on the reduction, and with the strong employment report received since that meeting, the September meeting should pave the way for the reduction by the end of the year. the year.

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