CLICK HERE for the meeting minutes:
The European major indices have modest changes on the day with the France’s CAC and Spain’s Ibex the weakest. The provisional closes are showing:
A snapshot of the forex market as London/European traders look to exit shows the AUD is the strongest and the JPY is the weakest. That was the order at the start of the NY session. However, each have increased their relative advantages. The GBP was lower at the start of the New York session, but with all the Brexit chatter from EU and UK officials, the GBP has moved higher in the NY session. The USD has weakened in the the NY session with the greenback losing ground vs. both the GBP and the AUD over the last 4 or so hours.Should drop further on dollar strength. Note how well key horizontal levels react. $20 is a great buying level. $40 should be easy.
Gold buyers will be looking at the FOMC minutes carefully tonight to look for clues from the Federal Reserve from the September meeting.
The FOMC minutes could be very useful in carrying details of the debate on conditions needed to trigger a rate rise under the central bank’s new approach in aiming for ‘average inflation’. The basic idea of ‘average inflation’ is that the Fed is reassuring the market that it will not be jumping to raise rates at the first sign of positive inflation. However, it is the details that the market will be wanting to see.
Gold buyers will be looking to see specific detail on how the average inflation mechanism will work. The bottom line to look for from the Fed is the harder it is for the Fed to raise rates the better news that will be for gold. The Fed may also reveal whether the potential for other asset purchases were discussed. If they were then that should support gold as well. Gold traders will be watching the FOMC minutes for a fresh wave of interest. The other aspect to note is that as long as fresh US stimulus hopes remain alive that will support stocks and weaken the USD.
Therefore, a perfect picture for gold would be bearish minutes and positive US stimulus hopes. It remains to be seen exactly what will happen with the stimulus bill after Trump’s tweet that he wants to wait until after the elections for more stimulus.
Many investors have still been building their gold positions. The global holdings in gold backed ETF’s are at their record highest level and holdings expanded in August and September even as price in spot gold fell. The case for gold buying remains: low US rates through to 2023, large amounts of QE, a weak dollar, and a US election risks, and October a strong seasonal month for gold.
