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Gold prices see modest fall following Fed minutes showing neutral central bank

Kitco News

(Kitco News) - Gold prices have fallen back into negative territory as the minutes of last month’s Federal Reserve monetary policy meeting show the central bank appears to be in no hurry to adjust interest rates anytime soon.

Last month the Federal Reserve cut interest rates for the third time since July, but signaled that it a neutral stance going forward. The minutes reaffirmed the central bank’s neutral forward guidance.

“With regard to monetary policy beyond this meeting, most participants judged that the stance of policy, after a 25 basis point reduction at this meeting, would be well calibrated to support the outlook of moderate growth, a strong labor market, and inflation near the Committee’s symmetric 2 percent objective and likely would remain so as long as incoming information about the economy did not result in a material reassessment of the economic outlook,” the minutes said,” the minutes said.

The gold market has been struggling to find momentum as positive investor sentiment has started to shift interest rate expectations. Although gold prices dropped in initial reaction to the Fed minutes, the price action has been fairly muted. December gold futures last traded at $1,472.20 an ounce, down 0.14% on the day.

Although the central bank committee is optimistic that is current monetary policy will support growth. Some members continued to highlight risks to the economy.

“In particular, risks to the outlook associated with global economic growth and international trade were still seen as significant despite some encouraging geopolitical and trade-related developments over the intermeeting period. In light of these risks, a number of participants were concerned that weakness in business spending, manufacturing, and exports could spill over to labor markets and consumer spending and threaten the economic expansion,” the minutes said.

Royce Mendes, senior economist at CIBC, said that the minutes didn’t hold any major surprise but added that it has helped to push bond yields and the U.S. dollar slightly higher, which are both negative factors for the gold market.

He added that markets are still pricing in another cut by mid-2020.

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