23rd February 2017

 Gold has been stuck in a fairly narrow range for much of the past few days and we saw little change in Wednesday’s session despite the release of the widely awaited Federal Reserve minutes. The minutes revealed that the Fed said that it could raise interest rates “fairly soon” should jobs and inflation data come in line with expectations, but whether this necessarily points to a March move was not made explicitly clear. In this regard, doubts arose when Fed governors said in the minutes that they were seeing only a “modest risk” inflation would increase significantly and suggested that the central bank would “likely have ample time” to respond if price pressures emerged. This led to revised expectations that a March move may now not be likely, perhaps explaining the firmer tone we saw in gold late in the day. Futures markets are now assigning an 18% chance for a rate increase during the FOMC’s mid-March meeting, although the fed funds curve suggests the probability could be as high as 27%. Whatever the case, the numbers show that a significant majority expect the Fed to stand pat during March in favor of a June move, where the odds stand at 71%.