LONDON (Commodity Online): Continued soft U.S. monetary policy may have limited impact on gold since it’s already factored into the market, said HSBC in a research note.
Members of the Federal Open Market Committee, which concludes a two-day meeting Wednesday, are expected to start releasing each member’s projections of the appropriate federal-funds rate at the end of 2012, 2013 and 2014, as well as what year the first rate hike should occur.
HSBC North American economic Kevin Logan expects a majority will choose a year after 2013 as the first year for a federal-funds increase, thereby extending current policy for an exceptionally low federal-funds rate of zero to 0.25%.
“Low interest rates are theoretically supportive of gold prices but this may already be largely factored into current gold prices and so the release could have little impact on bullion market,” said HSBC.
HSBC also said that a majority of the current FOMC have favor adopting an explicit long-run inflation target, creating a likelihood that members will adopt a long-run target of roughly 2.0%. This would dampen any tendency toward price declines therefore be “mildly bullish” gold.
