Gold prices hold support above $2,600 as the Fed sees potential for slower rate cuts

NEW YORK (November 26) The gold market continues to hold solid support above $2,600 an ounce, even as the Federal Reserve signals a potential slower pace of easing, according to the minutes from the Federal Reserve’s November monetary policy meeting.

The minutes reveal that the monetary policy committee continues to expect inflation to trend toward the 2% target. At the same time, the central bank noted that downside risks to the economy and the labor market have slightly eased, reducing the need for aggressive action.

“Almost all participants agreed that risks to achieving the Committee’s employment and inflation goals remained roughly in balance. Some participants judged that downside risks to economic activity or the labor market had diminished. Participants noted that monetary policy would need to balance the risks of easing policy too quickly—thereby possibly hindering further progress on inflation—with the risks of easing policy too slowly, thereby unduly weakening economic activity and employment,” the minutes said.

“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,” the minutes added.
The gold market is showing little reaction to the minutes. Spot gold is trading in neutral territory, last priced at $2,623.80 an ounce, roughly unchanged on the day.

Although the central bank has embarked on a new easing cycle, the committee reiterated that it remains data-dependent and is not following a pre-set course.

“In discussing the positioning of monetary policy in response to potential changes in the balance of risks, some participants noted that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated. Others remarked that policy easing could be accelerated if the labor market weakened or economic activity faltered,” the minutes said.

While the Federal Reserve continues to hedge its bets on rate cuts, markets remain confident in a reduction next month. According to the CME FedWatch Tool, there is a 59% chance of a 25-basis-point cut before Christmas.

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