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Gold price remains near session lows, sees little reaction to January Fed minutes

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(Kitco News) - The gold market remains near session lows even as the Federal Reserve signaled that it will continue to maintain its ultra-loose accommodative policies as uncertainty continues to dominate economic growth, according to the minutes of last month's monetary policy meeting.

"Participants agreed that the path of the economy depended significantly on the course of the virus and progress on vaccinations. Many participants remarked that the pandemic continued to pose considerable risks to the economic outlook, including risks associated with new virus strains, potential public resistance to vaccination, and potential difficulties in the production and distribution of vaccines," the minutes said.

Gold is seeing little reaction to the minutes from the Federal Reserve's January meeting. Gold prices are trading near their lowest levels since November. April gold futures last traded at $1,773.30 an ounce, down 1.4% on the day.

Economists note that the latest minutes don’t reveal a lot of new information on the future path of monetary policy. Paul Ashworth, chief U.S. economist at Capital Economics said that the minutes continued to highlight the central bank’s dovish tilt.

“We doubt that the Fed will begin to taper its asset purchases until early next year and believe that the first rate hike will be delayed until 2024,” he said.

Particularly important for gold investors is the Federal Reserve’s outlook on inflation as some participants see risk more balanced and that they are looking past short-term factors.

“Participants generally viewed the risks to the outlook for inflation as having become more balanced than was the case over most of 2020, although most still viewed the risks as weighted to the downside,” the minutes said.

The minutes also noted that the central bank monetary policy committee is paying more attention to equity market valuations.

“Regarding asset valuations, some participants commented that equity valuations had risen further, that initial public offering activity was elevated, or that valuations might have been affected by retail investors trading through electronic platforms,” the minutes said.

The discussion came a week before a mob of retail investors, organized through social media, pushed silver prices to $30 an ounce trying to induce a short-squeeze in the precious metal.

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