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Gold, silver gain in Asia as Fed Sept hike less likely after minutes

CommoditiesAug 19, 2015 10:13PM ET
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© Reuters. Gold. silver gain in Asia on Fed minutes

Investing.com - Gold and silver gained smartly in Asia on Thursday after prospects for a rate hike in September by the Federal Reserve appeared dim after the release of July meeting minutes late on Wednesday.

Gold for December delivery traded up 0.56% to $1,134.20 a troy ounce, while silver for Silver for September delivery soared 1.03% to $15.335 a troy ounce.

Copper for September delivery fell 0.05% to $2.273 a pound.

The latest Federal Reserve meeting highlighted concern over the state of the global economy, driving markets to question the likelihood that the Fed will raise rates next month.

The minutes showed policymakers continued to express broad concerns about lagging inflation and the weak world economy even as the U.S. job market improved further. Market expectations for a Fed hike in September fell from one in two to roughly one in three after the minutes were published.

"It looks like based on commodity prices, China, wages not really picking up, that [Fed officials] are not getting any closer to meeting their inflation target and seems like they're probably not going to be willing to go in September" with a rate hike, said Don Ellenberger, head of multi-sector strategies at Federated Investors in Pittsburgh.

A delay in the start of the tightening cycle is seen as supportive of equities. However, concern about the strength of the global economy.

Overnight, gold surged amid a weaker dollar and muted U.S. inflationary gains last month.

On Wednesday morning, the U.S. Bureau of Labor Statistics (BLS) said its Consumer Price Index (CPI) for the month of July ticked up 0.1%, following solid gains of 0.3% and 0.4% in June and May respectively.

A modest gain in apparel prices failed to offset declines in electricity and auto prices. Airfare prices also weighed on the July CPI, after plunging 5.6% -- its sharpest monthly drop in two decades. Analysts expected the July CPI to increase 0.2% on a monthly basis. The BLS' headline inflation reading also increased 0.2% on a year-over-year basis, after posting a yearly gain of 0.1% in June.

The Core CPI, which strips out food and energy prices, also inched up 0.1% from its June level, below expectations for a 0.2% monthly gain. Over the last 12 months, the core reading has increased 1.8% after remaining unchanged from June.

The Federal Reserve has indicated that it could raise short-term interest rates for the first time in nearly a decade when it is "reasonably confident" that long-term inflation is moving toward its targeted goal of 2%. Long-term inflation has failed to reach the Fed's annual 2% target for every month over the last three years.

Gold, silver gain in Asia as Fed Sept hike less likely after minutes

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