Gold recovers on divided Fed

August 18, 2016

In today’s session the gold price initially traded lower before the FOMC minutes from the US Federal Reserve but the recovered some of its losses as it became clear that the Fed policy makers were split on deciding further interest rate hikes.

Most players in the market today expected a hawkish tone from the US central bank which would have set the stage to lift interest rates next month which initially put pressure on the gold price but as the speech unfolded it became clear that a rate rise was far from certain.

“While the minutes appear more hawkish than the official statement, there have been a selection of disappointing data releases since the time of the meeting, employment notwithstanding. As a result, there has been evidence for both sides to point to, which has resulted in recent speeches by FOMC members containing a wide range of views of the appropriate course of policy,” said Royce Mendes, senior economist at CIBC World Markets

Some analysts say that with a movement in September now in doubt there may not even be a rate hike until next year as the fed would be cautious to tighten monetary policy in November or December around the time of the US presidential election.

A bullish minutes would have strengthened the US dollar making the currency more attractive which is not good news for gold which tends to move in the other direction.

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