Gold Rallies Following Fed Minutes

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The Australian and New Zealand dollars came off one-month lows on Thursday as their USA counterpart weakened after minutes of the Federal Reserve's last meeting showed policymakers were anxious by recent softness in inflation. Inflation has remained below the central bank's 2 percent target for more than five years.

Overall, they're looking for clues on: 1- the official start of the balance sheet reduction plan, 2- the discussion surrounding the weak inflation pressure.

In the formal statement after the July 25-26 meeting, the Federal Open Market Committee said the scale-back of the Fed's $4.5-trillion balance sheet would happen "relatively soon".

Also weighing on sentiment was the disbanding of President Donald Trump's business advisory councils after a stream of CEOs quit in the aftermath of the Charlottesville protests. Therefore, we expect the gold price to move higher towards Rs 29,300 levels.

Earlier, the dollar touched its highest level in almost three weeks against a basket of rival currencies, boosted by expectations for another Fed interest rate rise in 2017 and cooling geopolitical fears.

The dollar had already been gaining strongly ahead of the European Central Bank release, recovering from overnight losses to gain 0.4 percent against a broad trade-weighted basket of its rivals.

- The Stoxx Europe 600 index added 0.7 percent to 379.09, the highest in a week. The kiwi faces stiff chart resistance around $0.7360.

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Hong Kong's Hang Seng Index gained 0.21%.

The dollar continued its positive start to week, as solid retail sales data on Tuesday overshadowed a slump in US housing data amid growing expectations the Fed will increase interest rates for a third time later this year.

The yield on United States 10-year Treasuries fell to levels reached yesterday, at lows of 2.222 per cent at the time of writing after the minutes were released.

As a group, Fed members generally believe inflation will remain low through the second half of 2017, with many believing it will stabilize "over the next couple of years from its current low", according to the minutes.

- Britain's 10-year yield gained two basis points to 1.105 percent, the highest in a week. Officials eventually made a unanimous decision to keep its key policy rate unchanged in a range of 1 percent to 1.25 percent.

Gold for December delivery was recently up 0.7% at $1,288.00 a troy ounce in electronic trading, extending gains after settling up 0.3% on the Comex division of the New York Mercantile Exchange. The aussie firmed up following a rally in base-metal prices.

Meanwhile, industrial production grew 0.2% on the month in July, slipping below estimates of 0.3%. Also, the Nasdaq Composite was up by 0.18%.

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