Gold Extends Gains Following Fed Minutes

By Stephanie Yang Features Dow Jones Newswires

Gold prices rose Wednesday after minutes from the Federal Reserve's latest meeting indicated that officials were conflicted on whether to raise interest rates in the coming months.

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Gold for December delivery was recently up 0.7% at $1,288.00 a troy ounce in electronic trading, extending gains after settling up 0.3% on the Comex division of the New York Mercantile Exchange.

On Wednesday, the Fed released minutes from the July meeting that showed central bankers were split on the timing of a future interest-rate increase, and noted lower-than-expected inflation numbers. The uncertainty lent support to gold, which pays its holders nothing and struggles to compete with yield-bearing assets when borrowing costs rise.

"It doesn't seem that that they're ready to go like they were two months ago," said Bob Haberkorn, senior market strategist at RJO Futures.

The central bank previously had cited plans to raise interest rates as many as three times this year, but the latest minutes raised doubts, traders said.

"The Fed is now sending out a mixed signal on future rate hikes," Mr. Haberkorn said. "We might not even have December on the table at this point."

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Meanwhile, the WSJ Dollar Index fell 0.4% to 86.33. A weaker dollar boosts gold prices by making the dollar-denominated metal cheaper for foreign buyers.

Base metals also rallied on Wednesday, as investors bet that China's attempts to mitigate pollution by cutting capacity at domestic smelters would take supply off the market and boost prices.

Copper for September delivery settled up 2.4% to $2.9535 a pound in New York, closing at a the highest level since November 2014.

Other industrial metals also surged to multiyear highs. The London Metal Exchange's three-month zinc contract soared to its highest level in 10 years on Wednesday, while the LME's aluminum contract rose to two-year highs.

Tai Wong, head of metals trading at BMO Capital Markets, said much of the recent run has been driven by Chinese speculators jumping into the market. Improving Chinese economic data and expectations for industrial demand also have helped metals like copper this year, analyst said.

"As long as the speculative fervor for these metals in China remains, they look like they will continue to go higher," Mr. Wong said.

Write to Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

August 16, 2017 15:57 ET (19:57 GMT)