Gold’s Fate Rests in the Fed’s Hands Today

With the minutes from the Fed’s latest meeting due later today, and the markets so sensitive to central bank policy, gold’s short-term prices hang in the balance.

From DailyFX.com:

Minutes from July’s Fed policy meeting are in focus. The central bank asserted that “near-term risks to the economic outlook have diminished” following the sit-down. Traders will be keen to see more about what lurks behind this assessment to gauge whether priced-in rate hike probabilities are indeed too low, as Mr Dudley argued. Needles to say, a hawkish tone is likely to boost the US Dollar and send gold prices lower.

The Mr. Dudley referred to above is New York Federal Reserve President Bill Dudley, who yesterday warned that a rate hike could come a lot sooner than many people think. The Federal Reserve has made a lot of similar commentary recently, but with just one rate hike in the past eight years, it seems unlikely.

Regardless, gold investors will thus be closely scrutinizing the Fed’s commentary. A dovish (lower rates, more accommodation) tone will likely spike gold prices, while a hawkish (rates rising, less stimulus) tone will probably cause a sell-off in the yellow metal.

Such is the reality of the modern markets, where central banking policy has come to define the mood of the markets at a global level.

The SPDR Gold Trust ETF (NYSE:GLD) fell $0.12 (-0.09%) to $128.35 per share in Wednesday morning trading. The GLD, which is the largest ETF tied to the price of gold, has gained about 26% since the start of 2016.

GLD-2016-08-17

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