The gold medal down as the Fed's minutes offer clues to the reversal of January's monetary policy



The gold medal down as the Fed's minutes offer clues to the reversal of January's monetary policy

(Kitco News) – The price of gold fell slightly after the release of the Federal Reserve's monetary policy meeting in January, with the general market reaction remaining relatively subdued.

The gold futures for the month of April for the Comex were trading at $ 1,342.20, down 0.19% on the day, after hitting new highs on 10 more months early in the session.

The January report revealed that Fed officials had discussed concerns about slowing global economic growth, particularly in China, noting that some downside risks had risen since the December meeting.

Officials also noted that business investment was moderate and that it was important to closely monitor financial markets.

In addition, the minutes highlighted the risks to US economic growth, which moderated after solid gains last year.

In addition, Fed officials reaffirmed that the Fed would continue to be patient and dependent on data to deal with future rate hikes.

Several officials said more rate hikes might be appropriate "only if inflation results are higher than in their base outlook", while others said that Rising rates may be needed later this year if economic growth did not disappoint, according to the minutes.

When it came to discussing the outcome of the Fed's balance sheet, Fed officials said the balance sheet could end later this year.

"Almost all participants felt that it would be desirable to announce too early a plan to stop reducing the holdings of the Federal Reserve later this year," the minutes said.

At the January meeting, the US central bank opted for a drastic change leaving interest rates unchanged at 2.25% to 2.50% and stating that it will be "patient" about the future direction of monetary policy.

"The case for a rate hike has declined," said Fed Chairman Jerome Powell following the central bank's decision. "I would need to see a reason for further rate hikes that should include an increase in inflation."

The Fed also removed the December reference to "some new progressive measures [rate] increases "being justified.

This development comes after the Fed raised rates four times in 2018 and the markets expect at least two more rate hikes in 2019.

Analysts noted that the minutes did not provide any new information that was meaningful enough to affect the market.

"Although the FOMC minutes do not contain any surprises, it seems that short-term gold traders have seized this opportunity to take profits after the report and after recent recent gains," said Jim Wyckoff, Technical Analyst. principal of Kitco. "The Fed's recent policy shift towards more accommodative monetary conditions has been a distinctly bullish underlying factor for several commodities markets, including precious metals. He has also been optimistic for the global stock and bond markets. "

However, the minutes were slightly more hawkish than the anticipated markets, noted CIBC Capital Markets Senior Economist, Capital Markets, Royce Mendes.

"Many participants were unclear about changes to federal funding later this year. However, many of them still thought that the most likely rate trajectory was even higher if the economy moved as expected, "said Mendes. "Overall, investors have reacted to the increasingly fierce inclination of many members, have bet on the greenback and increased short-term yields a little higher."

Warning: The opinions expressed in this article are those of the author and may not reflect those of the author. Kitco Metals Inc. The author has endeavored to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes. This is not a solicitation to exchange merchandise, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept liability for losses and / or damage resulting from the use of this publication.


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