Gold Advances as Fed Split on Whether Rate Hike Needed Soon

  • Fed divided on whether job market would continue to improve
  • Dollar pares gains after Fed releases July meeting minutes

Spot gold rose, erasing earlier declines, after minutes of the Federal Reserve’s July meetings showed policy makers were split on whether to raise U.S. interest rates.

Fed officials were divided last month on whether the job market would continue to strengthen and saw little risk of a marked pickup in inflation, minutes of the central bank’s July 26-27 policy meeting showed. The dollar pared gains after the minutes were released on Wednesday.

“They’ve been trying to talk investors into believing that they’re ready to raise rates,” Chris Gaffney, president of EverBank World Markets in St. Louis, said in a telephone interview. “From looking at the data, and looking at the minutes, I don’t think we’re any closer to a rate increase. It’s another wait-for-more-data, that’s the message.”

Gains in gold, which rallied 25 percent in the best first half in four decades, have slowed amid increasing speculation that an improving U.S. economy will spur the Fed to tighten monetary policy. Earlier Wednesday, traders priced in a 53 percent chance that rates will rise by December, Fed funds futures data showed. Those odds fell to 45 percent after the release of the minutes.

“Members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity,” according to the minutes.

Gold for immediate delivery rose 0.2 percent to $1,349.06 an ounce at 2:19 p.m. New York time.

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