Meeting minutes drive gold movement

RECENTLY, gold price has been stimulated by minutes of the two main central banks in the world; the Federal Reserve and European Central Bank (ECB).

On Wednesday, the Federal Open Market Committee's (FOMC) meeting minutes suggested that Fed officials were concerned about raising interest rates, due to the recent slowdown in inflation.

The US dollar fell after the release of minutes, while gold climbed to its highest level in two months as the dovish comment reduced investor expectations for a third rate hike later this year.

However, markets still anticipate another rate hike before the end of 2017. Judging from the weakness in inflation data, many would be looking at other crucial data such as employment and price data.

Should other economic data rise up to a healthy level, the December rate hike could be in focus.

Market participants are betting on a 40.4 per cent chance of a rate hike in December, according to the Chicago Mercantile Exchange's Fed Watch Tool.

Theoretically, gold price is sensitive to movements in US' interest rates, as the bond yield will be higher.

This could lift the opportunity cost of holding non-yielding assets such as bullion.

The dollar would also strengthen, which would also mean a drop in gold price.

Next up, markets will be focusing on the annually Jackson Hole symposium scheduled for August 24 to 26.