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Gold price remains near daily highs as Fed sees tapering beginning in mid-November

Kitco News

(Kitco News) Federal Reserve minutes from the September meeting showed central bank officials looking to start reducing their bond-buying stimulus program as soon as mid-November or mid-December, with plans to wrap up in the middle of next year.

"Participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate," the Federal Open Market Committee (FOMC) meeting minutes released Wednesday said.

"Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December."

Gold remained largely unchanged and was trading near its daily highs, with December Comex futures last at $1,793.30, up 1.93% on the day.

Earlier in the session, gold was very volatile, first dropping nearly $20 to $1,760 and then surging back up towards $1,800 an ounce following hotter-than-expected inflation numbers out of the U.S.

At the September meeting, the Fed kept its key interest rate and bond purchases unchanged. Fed Chair Jerome Powell also said that the central bank may start to taper its $120 billion in monthly asset purchases in November, with central bank officials showed growing support for raising interest rates in 2022. 

The minutes from the meeting showed officials discussing the pace of the potential tapering.

"The path featured monthly reductions in the pace of asset purchases, by $10 billion in the case of Treasury securities and $5 billion in the case of agency mortgage-backed securities," the minutes said. Participants noted that … the Committee could adjust the pace of the moderation of its purchases if economic developments were to differ substantially from what they expected. Several participants indicated that they preferred to proceed with a more rapid moderation of purchases than described in the illustrative examples."

There was also a debate among Fed officials regarding inflation expectations and rate lift-off timeline for next year.

"Various participants stressed that economic conditions were likely to justify keeping the rate at or near its lower bound over the next couple of years … In contrast, a number of participants raised the possibility of beginning to increase the target range by the end of next year because they expected that the labor market and inflation outcomes specified in the Committee's guidance on the federal funds rate might be achieved by that time; some of these participants saw inflation as likely to remain elevated in 2022 with risks to the upside," the minutes said.

Live 24 hours gold chart [Kitco Inc.]

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