Fed meeting minutes hints at December hike, dollar surges

Copper and gold prices returned to negative territory on Wednesday following the release of the Federal Reserve meeting minutes, which showed a majority of US central bankers expected another rate hike before the year concludes.

“The median respondent in each survey continued to expect one policy firming in 2016, with respondents generally expecting the rate increase to occur at the December meeting,” the Federal Open Market Committee (FOMC) September meeting minutes said.

Copper for December settlement on the Comex division of the New York Mercantile Exchange reacted by slipping 0.85 cents or 0.4% to $2.1770 per pound. Trade has ranged from $2.1755 to $2.1940.

Comex gold for December delivery fell 70 cents or 0.1% to $1,255.30 per oz. The contract has now declined 10 out of the last 13 sessions.

The release has taken on greater importance after three Fed members – Esther George, Loretta Mester and Eric Rosengren – voted to raise rates during the September meeting.

With a Presidential elections days after the November meeting, December is now seen as the last chance for the Fed to resume interest rate normalisation.

Doves argued weak foreign economic growth and sub-two percent inflation was the main reason to keep interest rates accommodative, while hawkish bankers cited a robust labour market and diminished global risks for reasons to hike.

“Several members judged that it would be appropriate to increase the target range for the federal funds rate relatively soon if economic developments unfolded about as the Committee expected,” the minutes said. “A few others, however, emphasized that decisions regarding near-term adjustments in the stance of monetary policy would appropriately remain data dependent.”

Last night, Fed Bank of Chicago president Charles Evans became the latest member of the central bank’s policy board to pave the way for a December increase, saying that policy “may well be changing soon”.

The dollar index reacted by pushing to 97.78, reflecting the growing expectation that the Fed will lift its benchmark interest rate by 25 basis points before the end of the year. Prediction markets are currently assessing a 60% chance that the Fed lifts rates, according to the CME Group FedWatch.

Still, exchange-traded funds (ETF’s) tracked by FastMarkets are standing at 2,156 tonnes, a 2016 high and an indication that investors remain attracted to gold’s safe-haven attributes.

“We still see support in the $1,240-50 range for now, with $1,260-65 being the first resistance zone. Investors will continue to eye developments for a potential Dec FOMC rate hike as well as the race to the US presidency as key market movers in the near term,” MKS said.

In data, the German WPI was better than forecast at 0.4% while the French final CPI was as expected at -0.2%. US JOLTS job openings disappointed at 5.44 million, the fewest amount of openings this year and below the forecast of 5.79 million.

Turning to US markets, the Dow Jones industrial average and S&P were both up 0.2%, while the dollar strengthened 0.3% to $1.1029 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex fell 69 cents or 1.4% to $50.55 per barrel, while the most active Comex silver contract was last trading at $17.615 per oz., up 10.6 cents.

(Editing by Tom Jennemann)