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Gold prices unable to hold gains as the Fed starts talking about talking about tapering bond purchases

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Editor's Note: The article was updated to reflect the drop in gold prices in delayed reaction to the latest minutes from the Federal Reserve.

(Kitco News) - In delayed reaction, the gold market has been unable to hold on to its gains and is seeing some selling pressure as the Federal Reserve signals that a discussion on reducing its bond-purchasing program could be soon on the table.

The minutes of the Federal Reserve’s April monetary policy meeting show that with momentum building in the U.S. economy, the committee is starting to talk about talking about tightening its current monetary policy.

“A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the minutes said.

However, even if the committee is starting to see a potential end to its ultra-accommodative it is in no hurry to reach that target.

“In their discussion of the Federal Reserve’s asset purchases, various participants noted that it would likely be some time until the economy had made substantial further progress toward the Committee’s maximum-employment and price-stability goals,” the minutes said.

After a slow start, the gold market is starting to see solid selling pressure in reaction to the latest Fed minutes. June gold futures last traded at $1,865.5 an ounce, down 0.16% on the day.

As expected, the U.S. central bank continued to playdown the growing inflation threat with many participants saying that they expect inflation to rise above 2% but that would be transitory.

The Fed minutes also showed a longer list of potential issues that the committee is watching. Some members noted that elevated equity valuations could pose a risk to the economy. Some committee members also noted elevated home prices.

“Various participants commented on the prolonged period of low interest rates and highly accommodative financial market conditions and the possibility for these conditions to lead to reach-for-yield behavior that could raise financial stability risks,” the minutes said.

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