Gold Struggles but Firms Following the Release of the Fed Minutes

Gold prices had been struggling and trading roughly $3.00 lower this morning. However prices firmed immediately following the release of the Fed minutes from the most recent FOMC meeting. Spot gold is now trading up, with a net gain of approximately two dollars at $1237.57 per ounce (3:30 EST). The majority of today’s net change in gold prices is directly due to the falling value of the US dollar. Trading modestly higher this morning, the US dollar began to selloff immediately following today’s release of the Fed minutes.

Fed Sees Rate Hike Fairly Soon

The Federal Reserve’s minutes indicated economic strength and moderate growth, coupled with uncertainty in regards to upcoming fiscal policy by the new administration. These factors and economic data were used to indicate that an interest rate hike could be forthcoming fairly soon.

According to the minutes, “Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the committee’s maximum-employment and inflation objectives increased.”

According to Bloomberg News, “The record of the Jan. 31 - Feb. 1 gathering showed Fed officials wrestling with uncertainty on issues ranging from the Trump administration’s fiscal stimulus plans to the headwinds a rising dollar may pose. The discussion of a rate hike ‘fairly soon,’ was tempered by other comments that indicated little concern about near-term inflation risks.”

The Staff Review of the Economic Situation indicated that the real GDP expanded at a moderate rate in the fourth quarter of last year. It also revealed that domestic financial conditions remain mostly unchanged.

Without question, the Fed has done its best to maintain stability and continuity without dramatically shaking the financial markets. At the same time, they presented a clear and transparent set of actions based upon specific targets as outlined in the minutes. This is truly an example that other branches of our government would be wise to follow.

Wishing you as always, good trading,