Gold Price strengthens post FOMC

10/7/14 (12.30pm). Gold futures are higher this morning currently trading at $1341 after the minutes of the Federal Reserve’s June policy meeting suggested that the central bank is in no hurry to increase interest rates and will keep them on hold for an extended period of time after the bank’s bond-buying program ends.

Gold had been under pressure since last Thursday when a strong U.S. jobs report fuelled speculation that the Fed could raise rates quicker than anticipated removing money from non interest bearing assets such as gold. However, they pushed higher for a second straight session this morning helped by a weaker dollar and as minutes of the Federal Reserve’s meeting gave no signal of an early hike in rates. The central bank recognized that the economy is continuing to recover but officials remain divided over the position for inflation in which the Federal Reserve Bank of St. Louis President James Bullard’s said surprisingly rapid gains in employment will fuel inflation which could offer extra support for gold as an inflation hedge.

The current rise in gold only represents an incomplete revival of the recent decline from the 2014 high of $1392 in the middle of March down to the June $1240 low. This partial recovery has thus so far reached just above the 61.8% Fibonacci retracement of that decline, therefore any strong breakout above the 61.8% Fibonacci level could prompt the precious metal to advance higher, targeting a re-test of the 2014 high around $1392. As predicted yesterday we currently believe that gold is a buy only market hoping to push at least all the way up to the previous March 2014 highs!