Gold prices are lower on Wednesday, as the metal has slipped to two-month lows. The spot price stands at $1281.34 per ounce in the European session. On the release front, it's a busy day in the US, led by two key events - Unemployment Claims and the Philly Fed Manufacturing Index. On Wednesday, the Federal Reserve released its minutes, and the hawkish tone gave a boost to the US dollar and pushed gold prices lower.
In a highly anticipated event, the Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game as to a rate hike will only intensify.
The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. On Tuesday, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US housing numbers were sharp on Tuesday. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.
Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen's first appearance as Fed chair at the conference. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference's usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. The markets will be listening closely to Yellen's remarks at the conference.
XAU/USD 1281.34 H: 1290.27 L: 1271.54
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