Gold Price Falls Into Negative Territory Following Dec FOMC Minutes

New York (Jan 3)  The gold market has pushed into negative territory in late-afternoon activity after the minutes of the December Federal Open Market Committee meeting revealed ongoing concerns over low inflation pressures.

While the majority of participants supported a rate hike in December, the minutes showed a growing divide within the committee and frustration over the mystery of low inflation.

The Minutes noted that several committee “expressed concern that persistently weak inflation may have led to a decline in longer-term inflation expectations; they pointed to low market-based measures of inflation compensation, declines in some survey measures of inflation expectations, or evidence from statistical models suggesting that the underlying trend in inflation had fallen in recent years.”

Despite what some are describing as dovish-tilt to the minutes, gold prices have pushed into negative territory. February gold futures last traded at $1,313.50 an ounce, down 0.20% on the day.

Jim Wyckoff, senior market analyst at Kitco.com said that he sees the selloff in gold as more technical with traders taking profits following a record 12-day rally in the precious metal, which pushed prices above $1,300 an ounce.While the U.S. central bank is still frustrated with the low inflation environment, the committee said it generally supports a continued gradual rise in interest rates, according to the minutes.

“Most participants reiterated their support for continuing a gradual approach to raising the target range, noting that this approach helped to balance risks to the outlook for economic activity and inflation,” the minutes said.

Adam Button, head of currency strategy at Forexlive.com, said that the report doesn’t do much for current interest rate expectations as the market continues to price in a March rate hike.

KitcoNews