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Gold prices holding modest gains as Federal maintains steady course on monetary policy

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(Kitco News) - The gold market continues to hold near all-time highs and is see some delayed buying momentum the Federal Reserve maintains a steady course to stabilize the economy devastated by the COVID-19 pandemic.

As expected the U.S. central bank kept interest rates at the zero-bound range and provided little new guidance on monetary policy.

“Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses,” the central bank said in its monetary policy statement. “The path of the economy will depend significantly on the course of the virus.”

August gold futures last traded at $1,951.10 an ounce, up 0.33% on the day.

The Federal Reserve also reiterated its stance that interest rates will not be changing for the foreseeable future.

“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the statement said.

Although gold prices have pushed to session highs following the release of the Fed statement, analysts have noted that market reaction has been limited as the Federal Reserve statement did not meet expectations.

“There were two risks heading into the decision: 1) that the Fed would launch or hint at something new in terms of programs/policy 2) that they would say something negative about the economy. Neither happened and markets generally indifferent,” said Adam Button, chief market strategist at Forexlive.com.

Katherine Judge, senior economist at CIBC, said that the U.S. central bank could be waiting for more information before they committee to new any new announcements.

“They appear to have opted to wait for the September meeting, when the next set of forecasts are due, to provide more concrete forward guidance on future rate hikes by perhaps tying them to the outcome of a macro variable,” she said. “Thursday’s Q2 GDP report will provide a starting point for assessing the scale of the output gap.”

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