“The reason behind the Fed not raising rates is due to problems in the emerging markets”, said Aslam.
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The minutes of the FOMC meeting gave no clear sign of when the Fed will pull the rate trigger.
“What’s supporting gold is that from unrelentingly bad news, which we saw until late July-early August”.
In its most recent policy statement from its July 28-29 meeting, the Fed said it continued to judge the risks to the US economy as “nearly balanced”, meaning it still sees a greater threat of a new downturn than it does of accelerating inflation and excessive growth.
Gold’s rebound is gathering pace as the precious metal posts strong gains in the wake of minutes from the Federal Reserve’s latest board meeting, which some suggest points to a reduced chance that interest rates will rise in September.
“We expect the market consensus for liftoff to reassemble around September shortly”, Citi said.
When investors revised their rate hike bets to later in the year, they also moved away from the dollar.
One argument made by supporters of a rate hike was that an appreciable delay in a tightening monetary policy would spark inflation or financial instability.
At the same time, “some” officials said economic reports had not yet provided the central bank the “reasonable confidence” it has been seeking that inflation will drift toward the Fed’s annual 2% target over the medium-term.
With the unemployment rate now at a seven-year low of 5.3 percent and hiring consistently solid, the job market is almost back to normal. “This shows that the market is still undecided, and a lot of will come down to the next set of payrolls in September – if it is a decent set of numbers then it will probably seal the deal”. The economy is close to full employment but inflation remains subdued. And the Labor Department reported earlier Wednesday that consumer prices rose 0.1% in July, less than economists expected, though inflation rose more sharply the prior two months.
On China, Fed officials believed that a big drop in the Chinese stock market would have only limited implications for growth prospects in the world’s second-largest economy.
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“I’m a bit surprised by the market reacting as much as that”, said Vassili Serebriakov of BNP Paribas. If members see this as a plausible risk, the Fed might resist raising rates – a government shutdown was the main reason the Fed held off on easing its bond-buying program during the fall 2013 government shutdown.
