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Gold choppy ahead of FOMC minutes


COMEX gold trades in a narrow range near $1280/oz amid mixed cues. Support from choppy US dollar is countered by gains in global equity market.

Market players are now focusing on FOMC minutes due later today at 2330 IST. Fed at its last meeting kept interest rate unchanged but downplayed risks to the economy from hurricanes and kept option open for December rate hike. Minutes of the meeting may further affirm market expectations that Fed will raise interest rate in December.

While December rate hike has been factored in, market uncertainty is high about Fed’s future stance. Tepid inflation and change in leadership has raised uncertainty about future stance. Fed Chair Janet Yellen will be replaced by Jerome Powell in February 2018. Yellen this week has indicated that she will resign from Fed Board once Powell has been sworn in.

Uncertainty about Fed’s monetary policy is also visible from the yield curve which has flattened the most since November 2007. The yield curve between two-year and 10-year notes flattened to a low of 57.4 basis points, the flattest level since late 2007.

Gold may remain choppy to positive ahead of FOMC minutes later today. Also in focus will be US economic data and development relating to US tax reforms and political crisis in Germany.

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