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Fed releases minutes from December meeting, gold price still down $40

Kitco News

(Kitco News) Gold remained near daily lows after the Federal Reserve released the December meeting minutes, which showed broad support for the central bank’s current bond-buying program.

During the December meeting the Fed kept rates unchanged near zero, while Chair Jerome Powell stressed that the central bank will continue its asset purchases until "the job is well and truly done."

The minutes from the meeting revealed that all Fed officials backed the current bond-buying pace.

“All participants judged that it would be appropriate to continue those purchases at least at the current pace, and nearly all favored maintaining the current composition of purchases,” according to minutes published Wednesday. “A couple of participants indicated that they were open to weighting purchases of Treasury securities toward longer maturities.”

The $120 billion monthly pace of purchases was said to be maintained until there was “substantial further progress” made to the central bank’s employment and inflation goals.

There was no significant reaction to the news, with gold prices edging up slightly but still remaining near their daily lows. February Comex gold futures were last trading at $1,913.80, down 2.08% on the day.

The Fed’s economic projections were updated during the December meeting, with the central bank now expecting the U.S. economy to grow 4.2% in 2021, the unemployment rate to fall to 5%, and inflation to come in at 1.8%.

There were no significant changes in the dot plot, with rates expected to remain near zero until 2023.

Powell also noted that the next four-to-six months the situation will be difficult.

“Clearly, there is going to be a need for help there,” Powell said. “We do have the flexibility to provide more accommodation … The coronavirus case numbers are so high and widespread, it seems that the impact on the economy will happen. You are seeing some slowing now and during the first quarter of next year.”

Powell added that the situation should get better in the middle of next year when people will start feeling comfortable going out and engaging in a broader level of activities. “During the second half of next year, the economy should be performing strongly,” he said.

The minutes also showed that further adjustments could be made to the bond-buying program in the future.

“Some participants noted that the committee could consider future adjustments to its asset purchases -- such as increasing the pace of securities purchases or weighting purchases of Treasury securities toward those that had longer remaining maturities -- if such adjustments were deemed appropriate,” the minutes said.

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