Gold Price Edges Down After Hawkish Fed Minutes

Gold fell from an 11-week high on Thursday (April 11) following the release of minutes from the March Federal Open Market Committee (FOMC) meeting.

The yellow metal lost the gains it made prior to the release, as the US dollar shot up. Spot gold was down 0.2 percent at US$1,350.70 an ounce, and US gold futures fell 0.4 percent to US$1,354.5 an ounce.

According to the minutes, “[t]he stronger outlook for economic activity, along with [an] increased confidence that inflation would return to 2 percent over the medium term, implied that the appropriate path for the federal funds rate over the next few years would likely be slightly steeper than [what policymakers] had previously expected.”

These comments left investors seeing the minutes as hawkish, and that forced the price of gold down.

Andrew Grantham, senior economist at CIBC World Markets, said those stats could help boost the US dollar, which in turn would be negative for gold. That’s because a stronger greenback makes commodities priced in dollars more expensive for investors using other currencies.

“The apparent greater confidence regarding the inflation and growth outlook should be modestly positive for the US dollar,” he said.

However, rising tensions over military escalation in Syria prevented further losses for the precious metal.

On Wednesday (April 11), US President Donald Trump warned Russia of imminent military action in Syria over a suspected gas attack. Trump declared that missiles “will be coming,” and attacked Moscow for standing by Syrian President Bashar al-Assad.

Addressing these political tensions, Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, stated, “while we expect volatility to remain high, gold will stay supported as long as a US military option remains on the table.” He added, “we could see prices rocket higher.”

Given the current political climate, Innes believes that gold at above US$1,400 could “be [in] the cards immediately.” As of 10:10 a.m. EST on Thursday, gold was down 0.95 percent, trading at US$1,339.40.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.