Gold prices jumped on the early release of the Federal Open Market Committee (FOMC) July meeting minutes, which raised concerns over the persistent low inflation and gave no indication that a September interest rate hike is a certainty.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last up $14.00 or 1.3 percent to $1,130.00 per ounce. Trade has ranged from $1,115.50 to $1,131.50.
The Fed’s policy board have been locked into a public debate over the correct timing of raising interest rates, which have been at near zero since December 2008,
In April, the Fed removed all calendar references its in forward guidance meaning the bank is now entriely data dependent.
Over the last few months, various members of the organisation have become increasingly hawkish with Federal Reserve chairwoman Janet Yellen expressing a desire to raise rates sometime this year.
However, inflation continues to fall below the Federal Reserve’s target of two percent inflation. Today in US data, CPI in July was up 0.1 percent over the previous month, below the 0.2 percent forecast.
Core CPI – excluding food and energy – was also up 0.1 percent month-over-month in July, again missing the consensus of 0.2 percent.
The persistent lack of inflation cuts across the dual-mandate of the Federal Reserve of maximum employment and price stability.
“The Committee agreed to continue to monitor inflation developments closely, with almost all members indicating that they would need to see more evidence that economic growth was sufficiently strong and labor markets conditions had firmed enough for them to feel reasonably confident that inflation would return to the Committee’s longer-run objective over the medium term,” the FOMC statement read.
Currently, the probability of rate hike next month stands at 45 percent, according to the CME Group Fedwatch – a tool to gauge the likelihood of a change in US monetary policy.
Earlier in the trading session, 36 percent of investors expected a rate hike in September.
The minutes were released sometime around 12:45 pm central time, fifteen minutes ahead of the scheduled release time of 1pm central.
Equity markets reacted favorable with the Dow Jones industrial average and S&P both trending higher. Currently both are down 0.4 percent respectively, with the dollar 0.8 percent softer at $1.1113 against the euro.
US commercial crude stocks rose 2.6 million barrels last week, up 94 million barrels from 2014. Oil has responded by falling nearly $2.03 or 4.7 percent to $41.09 per barrel.
As for the other precious metals, Comex silver for September delivery was last up 45 cents at $15.240 per ounce. Trade has ranged from $14.795 to $15.320.
Platinum for October delivery on the Nymex rose $17.50 to $1,011.60 per ounce, while the most-actively traded palladium contract was at $607.85 per ounce, up $10.75.
(Editing by Tom Jennemann)
The post Gold rises on dovish FOMC minutes release appeared first on The Bullion Desk.
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