Published: Fri, August 18, 2017
Business | By Max Garcia

Metals: Gold Continues Rise After Fed Minutes Show Division

Metals: Gold Continues Rise After Fed Minutes Show Division

Gold trading range for the day is 28737-29077.

Yields rose in reaction to the robust USA economic news, which increased the chances of a Fed rate hike later this year.

Amid steady job creation and the falling jobless rate, many Fed officials continue to dismiss weak price pressures, blaming them on "idiosyncratic" factors, such as falling prices for mobile phone plans and medications.

The two events sent the U.S. dollar tumbling on exchange markets, with the Dollar Index losing 0.3 percent over the prior day's close shortly after 1900 GMT.

The dollar sank to session lows against the yen, euro, Swiss franc and a number of other currencies after the minutes were released.

"It is very hard to ignore much higher US yields relative to G7 peers for any sustained period and the market has got itself rather too short on the dollar", said Marc Ostwald, global strategist at ADM ISI in London. The EUR/USD fell to its lowest level since July 28.

"The North Korea missile fears seems to be abating for now and if the recent bunch of strong US data translates into higher inflation, then markets will start pricing more interest rate increases from the Fed in the coming months", said Ulrich Leuchtmann, an FX strategist at Commerzbank in Frankfurt. South Korea's KOSPI index, reopening after a holiday on Tuesday, ended the day 0.6 percent higher.

- Germany's 10-year yield increased one basis point to 0.45 percent, the highest in more than a week. The government said the increase was related to consumer purchases of motor vehicles as well as discretionary spending. The metal, used in the auto industry for emissions-controlling catalytic converters, was being carried higher by a strong rally in industrial metals such as copper and aluminium this week, said Dominic Schnider at UBS Wealth Management in Hong Kong. Economists were looking for an unchanged reading of 9.8. They turned higher again after Jonathan Swan, a reporter at the news website Axios, on Twitter cited a source with direct knowledge as saying a rumor that Cohn is resigning was "100 (percent) false". Business Inventories were slightly worse than the estimate. The index reached its high level seen earlier this year and represents strong building confidence among the nation's home builders. Technical resistance was at the June high of $1,296.30 with Fibonacci support at $1,261.30, said analysts at ScotiaMocatta.

A report issued by the US Department of Commerce said housing starts fell 4.8% from the previous month, dropping to an annual rate of 1.155 million units in July.

The Fed is not the only central bank wary of weak inflation.

Details of the July meeting, released late on Wednesday, showed concerns that recent soft inflation data may cool the pace of monetary tightening in the world's largest economy despite moderate growth and very low unemployment.

The minutes also confirmed expectations that the central bank as soon as its next meeting in September could announce the start of a process of drawing down its $4.5 trillion asset holdings.

Gold XAU= advanced 0.4 percent to $1,287.51 an ounce, adding to Wednesday's 0.9 percent jump. If investors buy Treasuries then yields will fall, taking the dollar with them.

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