Gold Prices Flat Following Optimistic Fed Statement

New York (July 27)  Gold prices are only losing a little ground as the Federal Reserve acknowledged improving domestic economic growth.

Ahead of the report, gold prices were up about 0.5% on the day; however, since the release of the statement August Comex gold futures last traded at $1,321.40 an ounce, flat on the day.

The Federal Reserve left interest rates unchanged in its range between 0.25% and 0.50% following its monetary policy meeting. The central bank said that the labor market has strengthened while economic conditions have strengthened moderately.

However, despite its relatively unchanged economic outlook from the June statement, markets are keying on the slightly optimistic tone as the committee continues to call for a "gradual adjustment" in monetary policy.

"The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen," the statement. "Near-term risks to the economic outlook have diminished," the statement said.

While the Federal Reseve remains concerned about inflation, it expects to prices to pick up over the medium term.

The fact that gold is not selling off following the statement could be because, as analysts noted, it doesn't explicitly put a September rate hike on the table. Some analysts have noted that the Fed had the same stance last year, threatening a September move but ultimately moved in December.

"While subtle changes do suggest some progress towards a rate hike, there's nothing here that points to September, and we're retaining our projection for a hike in December," said Avery Shenfeld, senior economist at CIBC World Markets.

Source: KitcoNews