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(Kitco News) - The gold market continues to hold its ground above $2,000 an ounce as the minutes from the Federal Reserve's March monetary policy meeting provide little insight into next month's decision, according to some analysts.
The Federal Reserve committee members noted that because of the banking crisis, risks to the economy remain tilted to the downside.
"Participants generally observed that the recent developments in the banking sector had further increased the already-high level of uncertainty associated with their outlooks for economic activity, the labor market, and inflation. Participants saw risks to economic activity as weighted to the downside," the minutes said.
Although the committee sees below-trend growth for the U.S. economy, the central bank's staff provided more substance, saying in their updated forecasts that they see the potential for a mild recession this year.
Despite the growing economic risks, the central bank also noted that inflation remains persistently higher.
"With inflation remaining unacceptably high, participants expected that a period of below-trend growth in real GDP would be needed to bring aggregate demand into better balance with aggregate supply and thereby reduce inflationary pressures," the minutes said.
The minutes did note one comment that the Federal Reserve has moved closer to the end of its tightening cycle.
"Many participants remarked that the incoming data before the onset of the banking sector stresses had led them to see the appropriate path for the federal funds rate as somewhat higher than their assessment at the time of the December meeting. After incorporating the banking-sector developments, participants indicated that their policy rate projections were now about unchanged from December," the minutes said.
The gold market is not seeing much movement in reaction to the minutes as it remains off its session highs from the morning but still holds on to healthy gains. June gold futures last traded at $2,031 an ounce, up 0.51% on the day.
The minutes noted that committee members discussed the possibility of raising interest rates by 50 basis points or leaving them unchanged. In the end, the central bank decided to raise interest rates by 25 basis points.
According to the CME FedWatch Tool, markets see a 70% chance that the Federal Reserve will raise interest rates by another 25 basis points next month. However, that is expected to be the last rate hike in this tightening cycle. Markets continue to price in a rate cut before the end of the year.
Although tensions in the banking sector have eased since the collapse of two major U.S. regional banks and Credit Suisse, one of the largest banks in Europe, the Fed noted that lingering concerns could still weigh on economic activity.
"A few participants observed that credit card delinquencies, particularly for lower-income households, had risen in the face of elevated inflation and higher nominal interest rates. Participants noted that recent developments in the banking sector and the associated rise in uncertainty would likely weigh on consumer sentiment and that increased caution on the part of consumers could restrain spending," the minutes said.
