Gold cut its losses on Wednesday after the Federal Reserve Open Market Committee’s (FOMC) minutes said that the economy improved from the first quarter.
Gold for August delivery on Comex division of the New York Mercantile Exchange was last at $1,181.60 per ounce, which was about $5 higher than the pre-FOMC level.
“Economic activity has been expanding moderately after having changed little during the first quarter. The pace of job gains picked up while the unemployment rate remained steady,” the Federal Open Market Committee said in its policy statement.
The members of the Fed’s policy board are locked in a debate on when will be the right time to raise rates, which have been near zero since December 2008. Since its decision is now entirely dependent on US data, a rate increase could happen at any future meeting. Ten of the 17 voting members expected a rate hike sometime this calendar year.
“There was no specific wording on when the rate increase will happen. But they did suggest some movement towards their rate hike criteria, which are that inflation is moving back to two percent and the idea that the labour market is improving,” CNBC chief economist Steve Liesman said. “This is very much the statement that most of us expected.”
The CME Group’s FedWatch put the odds of a rate increase in September at 28 percent, up from 25 percent before the FOMC statement, and 68 percent in December, an increase from 64 percent earlier in the day. This indicator is based on 30-Day Fed Funds futures prices, which have long been used to express the market’s views on the likelihood of changes in US monetary policy.
Elsewhere, the ongoing negotiations between Greece and the International Monetary Fund (IMF) remain relevant to investors as a pivotal meeting will take place on Thursday. After talks degenerated over the weekend, the Mediterranean country has until the end of the month to repay 1.6 billion euros to the fund or face a possible exit from the bloc.
“Investors are just not interested in gold and physical demand is weak – it looks as though gold will languish around in low ground until investors once again need a safe haven,” FastMarketss William Adams, said. “Overall, we expect the Greece problem is escalate in the days and weeks ahead, which may well prompt more interest in gold. Needless to say, gold could lose what little support it has should a solution be found.”
In eurozone data today, final CPI year-over-year in May was in-line with forecasts of a positive 0.3 percent as was the core number of 0.9 percent.
In equities markets, the Dow Jones industrial average and S&P erased losses and were both essentally unchanged for the session, while the euro was 0.49 percent stronger at $1.1304 against the dollar.
As for the other precious metals, Comex silver for July delivery was up 9.5 cents at $16.065 per ounce. Trade has ranged from $15.885 to $16.100
Platinum futures for July delivery on the Nymex were up $0.60 at $1,080.40 per ounce, while the most actively traded palladium contract was at $722.50 per ounce, down $10.30.
“Inflation continued to run below the committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized,” FOMC minutes added.
Light sweet crude (WTI) oil futures were last down 55 cents to $59.90 per barrel.
(Editing by Tom Jennemann)
The post Gold pares losses even as FOMC says economy is improving appeared first on The Bullion Desk.
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