(Kitco News) - The gold market has managed to secure its footing above $3,300 an ounce as the precious metal finds some support, with the Federal Reserve continuing to tread carefully on U.S. monetary policy—even amid some support for a potential rate cut in July.
According to analysts, the minutes from the Federal Reserve’s June monetary policy meeting held few surprises, as the central bank maintained its neutral stance.
“In considering the outlook for monetary policy, participants generally agreed that, with economic growth and the labor market still solid and current monetary policy moderately or modestly restrictive, the Committee was well positioned to wait for more clarity on the outlook for inflation and economic activity,” the minutes said.
“A couple of participants noted that, if the data evolve in line with their expectations, they would be open to considering a reduction in the target range for the policy rate as soon as at the next meeting,” the minutes also said.
Despite the dovish stance of “a couple of members,” markets are not expecting the Federal Reserve to cut rates this month. According to the CME FedWatch Tool, markets anticipate no easing until September.
“There is no mystery who the 'couple' is—Waller and Bowman. The news here is that no one else is joining them, and they were outnumbered by those who don’t see any cuts at all. That doesn’t mean the market is wrong to price in 63 basis points of easing this year, because there is a tendency for officials to be overly hawkish until the bad news hits; but we may be overindexing for Waller/Bowman,” said Adam Button, senior currency strategist at Forexlive.com.
Jeffrey Roach, Chief Economist for LPL Financial, said he didn’t see anything in the minutes that would shift the Federal Reserve's current neutral stance on monetary policy.
“Despite headwinds, the economy continues to trudge along, giving policymakers time to assess the projected impact from tariffs. Ever since last week’s payroll release, markets have not expected the FOMC to cut rates later this month. Next week’s inflation data will likely show a reacceleration, giving the Fed more reason to keep rates elevated. We don’t expect inflation readings to improve until later this year,” he said.
Gold prices saw a modest rally in reaction to the minutes; however, most of the gains have not been sustained. Spot gold last traded at $3,310 an ounce, up 0.29% on the day.
