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Gold up in Asia as investors note FOMC minutes, Japan trade

Commodities Aug 17, 2016 08:26PM ET
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© Reuters. Gold gains in Asia - Gold gained in Asia on Thursday as investors noted trade data out of Japan that signaled continued weak demand and mulled the latest FOMC minutes as suggesting a divided committee on the timing of any rate hike.

On the Comex division of the New York Mercantile Exchange, gold for December rose 0.44% to $1,359.85 a troy ounce. Silver futures for September delivery gained 0.47% to $19.780 a troy ounce, while copper futures for September delivery rose 0.05%.

In Japan, the adjusted trade balance surplus for July came in at ¥320 billion, wider than the ¥140 billion seen as imports imports plunged 24.7%, more than the expected 20.6% year-on-year decline for the 19th decline in-a-row, while exports fell 14.0% as seen, the 10th straight drop, for an overall trade balance surplus of ¥514 billion.

Overnight, the Federal Reserve's minutes from its July meeting depicted a committee sharply divided on the timing of its next interest rate hike, leaving markets confused on the U.S. central bank's direction in the coming months.

When the Federal Open Market Committee (FOMC) last met on July 26-27, some members anticipated that economic conditions would soon warrant "taking another step in removing policy accommodation," the minutes showed. It came as some participants judged that market conditions were close to reaching full employment, while most members noted that the rapid recovery of global financial markets in the wake of the Brexit decision provided encouraging signs on the resilience of markets worldwide. In addition, several members expressed concern that holding rates at persistently low levels could prompt investors to search for higher yields in equity markets, leading to the "misallocation of capital and mispricing of risk."

At the same time, others emphasized that it was appropriate to wait for additional data to determine whether prices could firm in the coming months, as long-term inflation continues to run below the Fed's long-term goal of 2%. The members noted that by delaying tightening the Committee could have a sufficient amount of time to respond if inflation increased more quickly than it anticipated.

"The Committee expected that economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate, and that the federal funds rate was likely to remain, for some time, below levels that are expected to prevail in the longer run," the FOMC said in the minutes.
"However, members emphasized that the actual path of the federal funds rate would depend on the economic outlook as informed by incoming data."

Investors who are bullish in gold are in favor of a gradual tightening cycle from the FOMC. Gold struggles to compete with high-yield bearing assets in rising rate environments.

Gold up in Asia as investors note FOMC minutes, Japan trade

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