Bill Musgrave – American Gold Exchange
After slipping 0.7% to close at a six-week low just above $1,200, gold rebounded sharply into gains after hours when the minutes of the latest Fed meeting showed the central bankers in no hurry to raise interest rates.
Gold initially fell in response to growing expectations that Greece will come to terms with its EU creditors to stave off possible default and exit from the euro. The metal fell as low as $1,197 on diminished safe-haven demand before bouncing to the close. It then accelerated to as high as $1,209 immediately upon the release of the surprisingly dovish Fed minutes.
As reasons to be “patient” before tightening monetary policy, FOMC policy makers cited risks to the U.S. economy from slower growth in Europe, a stronger dollar, turmoil in Greece and the Ukraine, and slow wage growth at home. Before the Fed minutes, traders had been expecting a June rate hike. Now speculation is shifting again toward later in the year.
The dollar quickly lost ground against major competitors following the release of the minutes, supporting gold and other commodities denominated in it for international trade by making them less expensive to users of other currencies. Raising interest rates would strengthen the dollar in part by increasing the yield of U.S. government bonds, which must be purchased in dollars by foreign investors.
The other precious metals all tracked lower before rebounding on the Fed minutes. Silver closed down 0.7% at $16.27 before rebounding 1.3% to $16.47 after hours. Platinum dropped 0.8% to $1,167.20 and then erased almost all of that loss, bouncing back up to $1,174. Palladium slid 0.9% to $776.60 and then recovered to $778.55 in electronic trade.