What impact will the release of the Federal Reserve meeting minutes have on gold prices?

The Federal Reserve released the minutes of its September interest rate meeting. While overall economic growth remained robust, concerns were raised about risks in certain sectors, particularly the labor market, and a relatively optimistic outlook on continued disinflation was expressed. The post-meeting resolution mentioned that some Federal Reserve governors opposed a 50-basis-point rate cut. The minutes detailed the internal disagreements within the Fed regarding the size of the rate cut, reflecting the Fed's conflicting desire to cut rates quickly while also being wary of uncertainties. This implies that the Fed's rate-cutting path will not be particularly smooth. Given the current complex macroeconomic factors, predicting the Fed's rate-cutting path is difficult, which will significantly impact gold prices (2650.59, 11.29, 0.43%).

The Federal Reserve is relatively optimistic about inflation and projects it will fall to its 2% target by 2026. In these minutes, the Fed further lowered its inflation forecast, attributing the further decline primarily to: further slowing economic growth and declining inflation expectations; the decline in food and energy prices playing a significant role in easing prices, with the resulting transmission effect leading to lower prices for other goods and services; and a continued slowdown in nominal wage growth, leading to increased discounts on goods after a decline in purchasing power. Core US inflation is declining more slowly than overall inflation. Declining nominal wage growth will help ease service inflation, but rental prices are rigid. The minutes mentioned that housing service prices are still rising at a high rate, and it will still take considerable time to address the last mile of inflation in the US.

The Federal Reserve increased its concerns about the labor market and lowered its economic growth forecast for the second half of the year. After US inflation temporarily eased, the Fed increased its focus on the labor market. In the period leading up to the September interest rate meeting, the US labor market showed signs of significant weakening, with the average monthly increase in non-farm employment being lower than the average growth rate in the second quarter, and the unemployment rate reaching 4%, at 4.2%. The Fed's minutes stated that the unemployment rate is expected to be slightly higher than previously forecast by the end of the year. However, the September US non-farm payroll data significantly exceeded expectations, with the largest increase in employment since March 2024, and the unemployment rate fell by 0.1 percentage points to 4.1% from August. The Fed's minutes stated that labor market conditions are easing further but remain robust.

The credit market is one of the main risk areas under the US high-interest rate policy and is a key reason for the Fed's eagerness to cut rates. The minutes show that US borrowing costs remain high. Publicly listed companies and large enterprises can obtain financing through capital markets and non-bank lenders, but credit supply is tighter for smaller businesses with fewer channels. Credit quality in the commercial real estate market has further deteriorated, and the proportion of non-performing commercial real estate loans held by banks has further increased. On the consumer-related side, after credit card delinquency rates hit a 10-year high in the first quarter, the Fed's minutes indicated that they continued to rise moderately in the second quarter. Recently released Fed data shows that US consumer credit increased by $8.93 billion in August, far below the expected $13.45 billion. Financial risks are explosive and have far-reaching consequences, and the problems already exposed have alerted the Fed.

The above factors are sufficient to support the Fed's continued rate cuts, but the pace of subsequent rate cuts is uncertain. The Fed's minutes show that the vast majority of officials supported a significant initial rate cut, believing it would help maintain strong economic and labor market momentum. However, a small number of officials still felt that inflation was too high and that a first tentative 25-basis-point rate cut would be more in line with the path of monetary policy normalization and would be better for observing market and economic reactions. After the September Fed interest rate decision was announced, the situation in the Middle East further deteriorated, and international crude oil prices (75.01, -0.10, -0.13%) have risen significantly since the end of last month. If crude oil prices continue to rise, the probability of a future rebound in US inflation will increase, and the Fed's rate-cutting pace may face some constraints.

Given the uncertainties, international gold prices may remain volatile. International gold prices rose for a short period after the Fed's decision was announced, but they fell slightly at the beginning of this month. In the short term, the benefits of the Fed's first significant rate cut have fully fermented in the market, with both the A-share and US stock markets rising and risk appetite increasing, which is not conducive to the prices of safe-haven assets such as gold. In addition, the US released positive non-farm economic data, while the Eurozone economy remains weak, the US dollar index has rebounded significantly in the short term, and the US 10-year Treasury yield has once again exceeded 4%, which has constrained international gold prices. Until factors such as US inflation, the economy, and risks do not give the Fed a stronger desire to cut interest rates, international gold prices may mainly fluctuate within a wide range. Of course, the three long-term factors of great power game, cyclical economic downturn, and "de-dollarization" still support international gold prices.