Make Kitco Your Homepage

Gold prices holding steady as Fed minutes show little direction for monetary policy

Kitco News

(Kitco News) - Gold prices are holding on to modest gains Wednesday, seeing little reaction to a fairly neutral Federal Reserve, according to the minutes of the September monetary policy meeting.

The minutes show that the committee cut rates in September because of growings risks of falling inflation pressures. According to the minutes, committee members noted that a cut in September would underline the central bank’s commitment to symmetric 2% inflation. However there appears to be little commitment for further easing.

“With regard to monetary policy beyond this meeting, participants agreed that policy was not on a preset course and would depend on the implications of incoming information for the evolution of the economic outlook,” the minutes said.

Gold prices have been in positive territory for most of the day and have seen further gains in initial reaction to the minutes. December gold futures last traded at $1,513.20 an ounce, up 0.63% on the day.

The minutes also showed some reluctance from some committee members to lower interest rates.

“Several participants favored maintaining the existing target range for the federal funds rate at this meeting. These participants suggested that the baseline projection for the economy had changed very little since the Committee’s previous meeting and that the state of the economy and the economic outlook did not justify a shift away from the current policy stance, which they felt was already adequately accommodative,” the minutes said. “A few of the participants favoring an unchanged target range for the federal funds rate also expressed concern that an easing of monetary policy at this meeting could exacerbate financial imbalances.”

However, the door to lower interest rates does remain open as the minutes shows some participants are worried about growing inflation pressures.

“Several participants noted that statistical models designed to gauge the probability of recession, including those based on information from the yield curve, suggested that the likelihood of a recession occurring over the medium term had increased notably in recent months,” the minutes said.

Katherine Judge, senior economist at CIBC, said that the minutes only outlined the current divide within the central bank. However, she added that it doesn’t appear that the central bank is on the cusp of another rate cut.

“We are sticking with our call that the Fed will wait until December to pull the trigger on another quarter point cut,” she said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.