Gold prices remained within support levels, which currently is set at $1,800 an ounce, even after the Federal Reserve hinted at the possible tightening of monetary policies ahead of schedule. Analysts said the moot reaction to the agency's minutes may indicate continued investor concerns of remaining underlying economic risks.
At the Federal Reserve's June monetary policy meeting, some committee members said they expect the central bank to tighten its monetary policies sooner than expected. Officials mostly had an optimistic tone during the discussions as the U.S. slowly recovers from the economic effects of the pandemic.
"Participants observed that economic activity was expanding at a historically rapid pace, led by robust gains in consumer spending. A vast majority of participants revised up their projections for real GDP growth this year compared with the projections they had submitted in March, citing stronger consumer demand and improvements in vaccination rates as the primary reasons for these upgrades," the minutes said.
The gold market was relatively unaffected by the discussions, with prices seeing very little movement. August gold futures remained at around $1,806.50 an ounce Thursday - up by 0.70% from the day before.
Analysts said the discussions provided an unclear signal on the true state of the economic momentum. They said markets will likely be more reactive when the Committee will release more information regarding the labor market and inflation in the coming months.
The minutes specifically stated two underlying risks that could derail the country's economic recovery. These are disruptions to the supply chain and the growing labor shortage throughout the country. The Federal Reserve reiterated its stance that the rising prices because of inflation are just "transitory."
"Looking ahead, participants generally expected inflation to ease as the effect of these transitory factors dissipated, but several participants remarked that they anticipated that supply chain limitations and input shortages would put upward pressure on prices into next year," the minutes said.
Analysts said the information provided in the minutes was mostly positive and that the central bank has shown restraint in how it is handling monetary policies.
"The minutes of the June FOMC meeting showed that policymakers viewed the US economy as moving in the right direction, while still being underwhelmed by progress in the labor market," analysts at CIBC said.
