Yesterday, the minutes of the Federal Reserve’s June meeting were released. What do they say about the Fed’s stance and what do they mean for the gold market?

The recent FOMC minutes hardly add anything new. The FOMC members agreed that the labor market had continued to strengthen and that economic activity had been rising moderately so far this year. Participants expected that inflation would remain low, but it would stabilize around the target over the medium term. Some analysts believe that the minutes were slightly dovish, as they suggest tensions over the inflation shortfall. However, we do not buy that interpretation. Surely, “several participants expressed concern that progress toward the Committee’s 2% longer-run inflation objective might have slowed and that the recent softness in inflation might persist.” But the consensus medium-term outlook for inflation was little changed:

“Most participants viewed the recent softness in these price data as largely reflecting idiosyncratic factors, including sharp declines in prices of wireless telephone services and prescription drugs, and expected these developments to have little bearing on inflation over the medium run. Participants continued to expect that, as the effects of transitory factors waned and labor market conditions strengthened further, inflation would stabilize around the Committee’s 2% objective over the medium term.”

As a reminder, the Fed hiked interest rates at that meeting – so much for the alleged split among policymakers. Moreover, a number of participants pointed out that the improved prospects for foreign economic growth reduced downside risks to the U.S. economic outlook. The improved global economic outlook is bad news for the gold market, as it would provide support to risky assets at the expense of safe-havens.

However, the minutes showed a lack of consensus among the committee on when the central bank will start unwinding its balance sheet.