Gold holds its game in the $1640s post benign FOMC minutes
|- Gold solid in the $1600's as QE keeps demand for the precious metal up.
- FOMC minutes were benign, having limited impact on financial markets.
Gold has stuck to a tight range in the moments after the release of the Fed minutes, slightly bid on the session having travelled from low of $1,640 and $1,657 so far on the day. At the time of writing, Gold is trading at $1,648.60.
First of all, the Federal Reserves minutes have stated that there is extreme uncertainty about the outlook, adding, that trading conditions across a range of markets were severely strained and that rates will remain at zero throughout the COVID-19 crisis.
Key notes from the FOCM minutes
- Appropriate to maintain rates at zero until economy has ‘weathered’.
- "Many participants had repeatedly downgraded their outlook of late in response to the rapidly evolving situation."
- "All saw US economic activity as likely to decline in the coming quarter and viewed downside risks to the economic outlook as having increased significantly."
- "Participants noted that the timing of the resumption of growth in the US economy depended on the containment measures put in place, as well as the success of those measures, and on the responses of other policies, including fiscal policy."
- Meanwhile, the Fed's massive QE program has historically been associated with a suppression of real rates and gold is looking sturdy north of $1,600.
- Analysts at TD Securities explained that "it is still too early to say if we have entered the recovery phase just yet, with the risk of another containment induced deflationary shock still elevated, but recent price action has done well to firm upside momentum signals."
Looking forward, we continue to see a set-up for a multi-year bull market being cemented, as the market is flooded with monetary and fiscal stimulus, while Fed rates are at the zero bound, which suggests investors will continue to seek gold's warm embrace as real global rates become entrenched in negative territory. On the other hand — our trend analytics highlight that fading upside in silver could be beneficial as prolonged weakness in industrial demand should keep silver's recovery under wraps for now.
Gold levels
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