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Gold price largely ignores Federal Reserve statement that provides little new information

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(Kitco News) - The gold market remains under pressure but is still in sight of $1,800 an ounce as the Federal Reserve sheds little new light on monetary policy.

Wednesday, as expected, the U.S. central bank left its interest rates unchanged at its lower bound target range between 0.25% and 0%. At the same time, the central bank said that the U.S. economy had made some progress, but not enough to warrant a shift in the current monetary policy.

The Fed also said that it continues to discuss the prospect of tapering its monthly bond-purchase program.

"Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses," the statement said.

The gold market is taking the lack of new information in stride, with prices only slightly weaker in initial reaction. August gold futures last traded at $1,793.90 an ounce, down 0.33% on the day.

The central bank also continued to reiterate its view that rising inflation pressures will essentially be transitory.

"Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses," the statement said. "The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain."

Some analysts note that the statement could have a bit of a hawkish tilt as it prepares markets for eventually tightening.

"This is undoubtedly a tip-toe towards a taper and a bit of a surprise," said Adam Button, chief currency strategist at Forexlive.com.

Avery Shenfeld, senior economist at CIBC also saw the latest monetary policy statement as hawkish, “given that the Fed didn’t add any cautionary notes to the outlook with respect to the Delta variant.”

Shenfeld added that markets will have to wait a little bit longer before they get any new guidance on monetary policy.

“Remember that the Fed will only update its forecasts in September, so this meeting was unlikely to be very decisive in terms of any new thinking on the outlook or the policy response. If, as we expect, the economy and job market continue to improve, the September meeting is more likely to be used to give the formal warning about a tapering in early 2022.  

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.