The Federal Reserve is due to release the minutes from their latest meeting in April. What can we expect from them and how can they affect the gold market?

After its last meeting, the FOMC downgraded its view of the labor market and acknowledged the slowdown of the U.S. economy, however, it considered the weak economic activity in the first quarter as caused by some transitory factors. The minutes from the meeting should shed some light on how the Fed officials viewed the weak economic activity in the first quarter and offer deeper insight on whether officials saw the U.S. economy weak enough to delay the plans to hike interest rates. However, we will probably see that the Committee was still prepared to hike within the next few meetings.

What we can expect from the minutes? The officials probably discussed the weakness in the first quarter in detail and argued that it had been temporary as caused by harsh weather, the U.S. dollar appreciation, the West Coast port slowdown and the collapse in the energy sector. Investors should remember that the minutes often paint a more hawkish picture than the actual policy, however, the data has softened further since the April meeting. This is why Janet Yellen's speech on Friday at the Greater Providence Chamber of Commerce Economic Outlook Luncheon is probably more important for the markets as minutes are going to reveal the historical stance of the FOMC’s officials.

Summing up, the April statement practically eliminated the risk of a mid-year hike. The minutes should also sound dovish, however, they can be more hawkish that the statement (as they usually are) and we can still see (at least officially) determination at the U.S. central bank to move this year and to ensure that the Fed considers the interest rate hike on a meeting-by-meeting basis. Thus, the minutes may strengthen the negative sentiment toward gold, which started after strong housing data. However, a sharp market reaction may be unlikely, at least if the minutes are consistent with the recent comments from the Fed members. It seems that the Friday’s speech by Janet Yellen is much more important for U.S. financial markets and gold prices, since the April meeting was held before a whole batch of disappointing reports including April's retail sales came to light.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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