US Federal Reserve was forced to keep the target range for the Federal Funds rate flat at 0.25-0.50% after its June 14-15 meeting, owing to continuous risks to economic outlook and stagnating inflation expectations. Domestic data has been uneven recently, with mild payrolls report considered to be the key trigger for accepting the status-quo. All member of the Federal Open Market Committee (FOMC) voted for the decision, with Kansas City Fed President Esther George abandoning her hawkish call to raise the benchmark by 25 basis points. Janet Yellen, the Chair, agreed that there are some downside forces to interest rates that may be longlasting. On the short-term basis, she admitted that the upcoming UK referendum on EU membership has weighed on the Fed's decision to postpone the upward revision to the Fed Funds target range. The famous dot plot, which reveals individual members' perceptions of how interest rates are going to evolve in the future, showed that participants continue eyeing two interest rate hikes in 2016 and three in 2017. The terminal rate for the long run has shifted down to 3% from 3.3% in the March projection. The Fed estimates a 2% GDP growth every year during 2016-2018, also reflecting a moderate downward change in the outlook. Consumer prices, measured by the PCE Index, however, are forecasted to increase 1.4% this year. This indicates to an improvement from 1.2% seen three months ago.
The US consumer prices softened in the previous month, but still posted increases in housing and healthcare costs thus supporting inflation, which could still allow Federal Reserve to raise interest rates during the current year. According to the Labour Department release made on Thursday, consumer price index advanced 0.2% in May after rising 0.4% in April. Meanwhile, on a yearly pace, the CPI added 1.0% after accelerating 1.1% in April. Economists, in turn, predicted the CPI to gain 0.3% last month and advance 1.1% from a year ago. The overall increase in consumer prices could be explained by higher gasoline prices as well as rising rents. The so-called core CPI, which do not include food and energy costs, in turn, went up 0.2% in line with April data. That took the year-on-year core CPI rise to 2.2% from 2.1% in April. In the meantime, another report released in the same day posted an advance in the number of Americans applying for unemployment benefits last week. Moreover, the trend remains to be consistent implying a healthy labour market. The following data came a day after the Fed lowered its assessment of the jobs market and suggested a lower probability of interest rate hikes. The Fed has a 2% inflation target and tracks an inflation measure which is currently at 1.6%.
Upcoming fundamentals: US housing construction and oil rig count
Gold stops its surge on Thursday
Daily chart: The Yellow metal had surged for six consecutive trading sessions before it finally overheated and dropped. Amidst the Thursday's trading session, the metal climbed even above the level of 1,315, and the situation looked like it is about to reach the 1,330 mark. However, the commodity tumbled afterwards, fell below the monthly R1 at 1,278.62 and ended day's trading session at 1,276.85. Although at the start of Friday's session the bullion is on the rise again, and it has surged to 1,284. In addition the aggregate technical indicators predict a surge for the metal today and during the next week.SWFX traders still largely bearish on Friday
Spreads (avg,pip) / Trading volume / Volatility
Market participants foresee the price of gold at 1,275 by the end of August
Traders who were asked regarding their longer-term views on gold between May 17 and June 17 expect, on average, to see the metal around 1,275 by the end of August. Generally, 64% (+1%) of participants believe the price will be generally above 1,250 in ninety days. Alongside, 30% (+1%) of those surveyed reckon the price will trade in the range between 1,100 and 1,250 over the next three months