Gold rallies as Fed backtracks on hawkish comments

New York (Apr 10)  Gold surged back to its highest for two weeks as minutes from the latest US Federal Reserve meeting were far more dovish than expected.

Spot gold was trading up US$8 at near to US$1,320 as trading got underway in US markets Thursday, though data showing weekly new dole claimants at the lowest for seven years clipped some of the gains.

Gold had jumped sharply following the publication of the minutes with traders highlighting the removal of the reference to an unemployment rate of 6.5% as a trigger for raising interest rates.

In future, the Fed said it would “take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments”.

The metal was badly hit when Fed chair Janet Yellen had indicated interest rates might rise six months earlier than expected.

Loose monetary policies and low interest rates have been major supports for the gold price since the credit crunch of 2009 and the possibility of a reverse in policy hit the metal hard last year.

Commerzbank noted today that the minutes made it clear the Fed was much less hawkish on monetary policy than it appeared last month.

“No mention was made of the six-month period- cited by Fed chair Janet Yellen at the press conference – between the end of bond purchases and an initial interest rate hike.”

Concerns over the situation in Ukraine and an easing of selling through exchange traded funds (ETFs) also helped the price said the broker.

The Fed minutes also hurt the US dollar, which traditionally moves in the opposite direction to the gold price.

Other metals were also in better shape today with silver up to US$20.18 and platinum US15 better at US$1,454.