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Precious Metals Rally After Unexpectedly Dovish FOMC Minutes

October 11, 2017 at 20:27 by Vladimir Vyun

Gold and other precious metals rose today, though gains were limited for most of them (with the exception of palladium). The metals rallied after policy minutes released by the Federal Market Committee proved to be unexpectedly dovish, driving the US dollar down.

FOMC members that low inflation is not transitory and as a result another interest rate hike should be postponed until economic data proves otherwise:

Participants raised a number of important considerations about the implications of persistently low inflation for the path of the federal funds rate over the medium run. Several expressed concern that the persistence of low rates of inflation might imply that the underlying trend was running below 2 percent, risking a decline in inflation expectations. If so, the appropriate policy path should take into account the need to bolster inflation expectations in order to ensure that inflation returned to 2 percent and to prevent erosion in the credibility of the Committee’s objective.

Yet others argued that excessive accommodation may be dangerous and the next rate hike should occur before the end of the year. For now, CME FedWatch shows that speculators are still betting on the third rate hike in 2017, therefore the impact of the minutes on markets was limited.

December contract for delivery of gold ticked up 0.21% to $1,295.4 per troy ounce as of 20:23 GMT on COMEX today. December silver went up 0.16% to $17.24 per ounce. Spot price for platinum advanced 0.21% to $933.87, while price for palladium climbed as much as 2.82% to $962.84 per ounce.

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