Gold erased losses after minutes from the Federal Reserve’s March meeting showed several policy makers said a rise in their median projection for the main interest rate exaggerated the likely speed of tightening.
“Several participants noted that the increase in the median projection overstated the shift in the projections,” the minutes of the March 18-19 Federal Open Market Committee meeting showed. Fed Chair Janet Yellen said last month that the central bank may end its debt-buying program this year and raise interest rates in 2015.
Gold slid 28 percent in 2013, mainly as the outlook for less monetary stimulus dimmed the appeal of metal as an inflation hedge and equities soared to a record. Prices rebounded this year, climbing 8.9 percent through yesterday, partly as U.S. economic growth faltered.
“The market is surprised by the tone of the minutes because it now seems that the Fed is not as hawkish as it seemed earlier,” Tommy Capalbo, a broker at Newedge Group in New York, said in a telephone interview. “The market will now look for more clues at the next Fed meeting.”
Gold for immediate delivery gained 0.1 percent to $1,309.47 an ounce at 3:34 p.m. New York time. Earlier, prices fell as much as 0.6 percent.
On the Comex in New York, gold futures for June delivery settled 0.2 percent lower at $1,305.90 at 1:50 p.m. in New York, and erased losses in electronic trading after the Fed minutes were released at 2 p.m.
The precious metal jumped 70 percent from December 2008 to June 2011 as the Fed bought debt and cut interest rates to a record in a bid to boost the U.S. economy.
This year’s rally surprised analysts from Morgan Stanley and Goldman Sachs Group Inc. Prices reached a six-month high on March 17, two days before the Fed’s meeting concluded. Some policy makers expressed concern the rate forecasts “could be misconstrued as indicating a move by the committee to a less accommodative reaction function,” the minutes showed.
Since mid-March, hedge funds and other speculators misjudged gold in two of the past three weeks. Bullion will take its cue from how determined policy makers are to start raising interest rates, James Steel, an analyst at HSBC Securities (USA) Inc., said in an e-mailed report yesterday.
“The Fed sounds less hawkish than it did last month, which is good for gold,” Michael Gayed, the chief investment strategist at Pension Partners LLC, said in a telephone interview. “The market is confused because there are so many contradicting signals from the Fed.”
Silver futures for May delivery settled 1.4 percent lower at $19.77 an ounce on Comex in New York.
On the New York Mercantile Exchange, platinum futures for July delivery slid 0.2 percent to $1,438.90 an ounce. Palladium futures for June delivery gained 0.9 percent to $782.55 an ounce.
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