After the Release of the Fed Meeting Minutes, Did Gold Rebound and Then Give Back This Week?
In the early hours of today (July 6th), the minutes of the June meeting released by the Fed revealed that policymakers projected an interest rate hike in the second half of the year, but at a slower pace, which overall reinforced expectations of future rate hikes. After the release of the minutes, gold immediately plunged from 1921 and slowly recovered to 1919 after stabilizing at the low level of 1915, essentially giving back the gains of the previous two trading days this week.
Source: Mitrade
The meeting minutes show that almost all Fed officials at the meeting believed that further monetary tightening measures may be taken, but at a slower pace than the rapid rate of interest rate hikes seen since early 2022.
Additionally, due to concerns about economic growth and the impact of the prolonged delay in the consecutive ten rate hikes, although they decided not to raise rates in June, most officials believe that further rate hikes will be needed in the future. They believe that keeping the target range for the federal funds rate unchanged would provide enough time to assess progress on "full employment" and "price stability," and emphasized their commitment to maintaining the inflation target. Currently, despite inflation still being above the 2% target, economic data indicates that the rate hikes have had a cooling effect.
Following the release of the minutes, the US dollar index rose to 102.94, and the yield on the 10-year US Treasury bonds also increased to 3.943%, approaching 4%. Furthermore, the minutes fueled expectations of a 25 basis point rate hike in July, with the CME Group's FedWatch Tool indicating a 91.1% probability of a 25 basis point hike in July and an 8.9% probability of rates remaining unchanged.
Source: CME
From the current market expectations of a rate hike in July, it is highly likely that gold will continue to be suppressed by a strong US dollar in the short term, with little hope of a significant rebound. Considering the possibility of two rate hikes in the second half of the year as indicated in the Fed minutes and the positive performance of first-quarter economic data, gold still faces downward risks in the medium to long term.
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