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Gold Prices Remain Positive As Minutes Show Less Dovish Federal Reserve

Kitco News

(Kitco News) - Gold prices continue to hold on to daily gains even as the Federal Reserve minutes showed a slightly less dovish stance than markets initially expected.

The minutes of the March Federal Reserve monetary policy meeting showed that most committee members saw interest rates on hold through 2019 and remained relatively positive on the health of the domestic economy.

“A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year,” the minutes said. “Several of these participants noted that the current target range for the federal funds rate was close to their estimates of its longer-run neutral level and foresaw economic growth continuing near its longer-run trend rate over the forecast period.

Gold prices dropped slightly from session highs in initial reaction to the neutral minutes, but were holding on to most of their gains. June gold futures last traded at $1,311.40 an ounce, up 0.24% on the day.

According to some economists, the conversation among the central bank committee was of a neutral tone. The minutes noted that the committee’s monetary policy decision will be based on the health of the economy.

“Several participants noted that their views of the appropriate target range for the federal funds rate could shift in either direction based on incoming data and other developments. Some participants indicated that if the economy evolved as they currently expected, with economic growth above its longer-run trend rate, they would likely judge it appropriate to raise the target range for the federal funds rate modestly later this year,” the minutes said.

Adam Button, managing director at Forexlive.com, said that the minutes showed that the Federal Reserve is truly in the “wait-and-see” mode. He added that there is little in the minutes to warrant a rate cut by the end of the year.

The CME FedWatch Tool, shows that markets see a more than 50% chance of a rate cut by December.

Royce Mendes, senior economist at CIBC Capital Markets, also said that he think the minutes do little to justify the markets expectations of a rate cut.

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