Investing.com - Gold prices fell in Asia on Thursday as the Fed appeared a tad more hawkish in the December meeting minutes and investors fretted over inflation implications.
Gold futures for February delivery on the Comex division of the New York Mercantile Exchange fell 0.78% to $1,308.20 a troy ounce.
Minutes of the Fed's December meeting showed officials expect reductions in corporate and personal taxes to provide boosts to consumer and business spending, though they remain somewhat unsure of how much impact the recently passed reform effort will have.
The Federal Open Market Committee increased their expectations for 2018 GDP growth from 2.1%, or about trend since the post-financial crisis recovery, to 2.5%. “Most participants indicated that prospective changes in federal tax policy were a factor that led them to boost their projections of real GDP growth over the next couple of years,” the minutes stated.
While generally looking favorably on the rising stock market indexes, some officials have expressed concern that keeping policy overly accommodative could inflate bubbles.
“In light of elevated asset valuations and low financial market volatility, a couple of participants expressed concern that the persistence of highly accommodative financial conditions could, over time, pose risks to financial stability,” the minutes said.
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
Overnight, gold prices steadied on Wednesday after the dollar rebounded on strong economic data.
The Institute for Supply Management (ISM) index of national factory activity rose to a reading of 59.7 in December from 58.2 in the previous month. That beat economists for forecast for reading of 58.2.
A reading above 50 indicates growth in manufacturing, well below 50 indicates contraction.
The Commerce Department said construction spending rose 0.8% to a record of $1.257 trillion in November, topping economists forecast for a 0.6% rise.