Gold price remains near support at $1,730 as Fed Minutes reveal no major surprises
(Kitco News) - The gold market remains sharply lower, testing long-term support above $1,730 an ounce as the Federal Reserve signaled further aggressive monetary policy tightening later this month.
According to some economists, the minutes from the Federal Reserve’s June monetary policy meeting held few surprises for the market as the central bank continues to focus on growing inflation over growth.
“Most agreed that risks to inflation were skewed to the upside and cited several such risks, including those associated with ongoing supply bottlenecks and rising energy and commodity prices,” the minutes said.
At the same time the Committee also saw growing risks to the economy.
“Participants judged that uncertainty about economic growth over the next couple of years was elevated,” the minutes said. “Downside risks included the possibility that a further tightening in financial conditions would have a larger negative effect on economic activity than anticipated.”
The gold market remains under pressure but is seeing little reaction to the latest minutes. August gold futures last traded at $1,736.60 an ounce, down 1.55% on the day.
The minutes also highlighted the potential for another 75 basis point rate hike at the end of this month.
“Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting. Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes said.
Some analysts have questioned the resolve of the Federal Reserve as recession clouds begin to gather. However, the minutes show that the Fed appears resolved to fight inflation.
“Many participants judged that a significant risk now facing the Committee was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted. On this matter, participants stressed that appropriate firming of monetary policy, together with clear and effective communications, would be essential in restoring price stability,” the minutes said.