As soon as the FOMC Minutes appeared earlier today, the U.S. dollar sold off and gold went sharply higher. In doing so, gold ended the trading session right at technical resistance near the $1,135 /oz level. Gold traders are clearly reliefed that the Fed stays focused on its 2% inflation target, and that inflation remains an important condition before rising interest rates.
The FOMC Minutes were not very convincing, as opinions within the Fed committee were divided.
From the Wall Street Journal: "Minutes of the Fed’s July policy meeting left mixed markers about whether central bank officials are leaning toward or against a rate increase at their next meeting after months of signaling that they intend to move away from the near-zero interest-rate policy before year-end."
The FOMC Minutes included also a topic about inflation. This is a quote: "The staff’s forecast for inflation was revised down, particularly in the near term, as the decline in crude oil prices over the intermeeting period was expected to result in lower consumer energy prices. Although energy prices and non-oil import prices were expected to begin rising steadily next year, the staff continued to project that inflation would be below the Committee’s longer-run objective of 2 percent over 2016 and 2017."
So, presumably, gold did react positively on the fact that inflation is still targeted. Absent an interest rate rise, real interest rates remain flat.
If gold will succeed to close the month above $1,150 /oz it would be a good argument that gold is turning its downtrend.