Gold Prices Push Higher In A Delayed Reaction To Hawkish Fed Minutes
(Kitco News)- In a delayed reaction, gold prices have pushed higher Wednesday despite what some are describing as slightly hawkish minutes from the January Federal Reserve monetary policy meeting.
According to the minutes, Federal Reserve committee members are slightly more optimistic on U.S. economic growth, which could lead to an increase in interest rates hikes.
"Several others suggested that the upside risks to the near-term outlook for economic activity may have increased. A majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate," the minutes said.
Gold prices were relatively flat ahead of the report and only spiked modestly higher in a delayed reaction to the news. April gold futures last traded at $1.337.80 an ounce, up 0.50% on the day.
Senior technical analyst at Kitco.com Jim Wyckoff said that despite the optimistic economic outlook, some traders still see the Fed holding on to its plan of three rate hikes this year in order to let inflation reach the central bank's 2% target. Wyckoff added that higher inflation would keep real rates relatively low, making gold - a non-yielding asset - more attractive to investors.
While the minutes were more hawkish than expected, RoyceMendes, senior economist at CIBC World Markets, said that it doesn’t change theoutlook that the central bank will raise interest rates three time this year.
“While acknowledging the lift from fiscalstimulus, the Fed isn't moving away from its gradualist approach,” Mendes said. “However,there are still those on the committee that remain skeptical about theprospects for inflation. Doves continue to contend that policymakers should bepatient in trying to coax inflation higher. Overall, our outlook for three ratehikes this year remains appropriate given the balance between upside risks togrowth and below-target current pace of inflation, which leaves time forpolicymakers to use a gentle hand.”
By Neils ChristensenFor Kitco News
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