Gold prices extended their losses during Wednesday’s North American trading session, slipping below the key $3,300 mark after peaking at a daily high of $3,325 earlier. At the time of reporting, XAU/USD registered a 0.27% decline as investors absorbed the latest Federal Reserve policy minutes.
The Federal Reserve’s May 6-7 meeting concluded with a decision to hold interest rates steady, citing uncertainty over the economic impact of tariffs. Officials expressed a patient stance amid rising concerns over inflation and unemployment risks linked to trade tensions. Policymakers highlighted stagflation risks, noting that the “Committee might face difficult tradeoffs if inflation proves more persistent while growth and employment outlooks weaken.”
Given these challenges, the Fed adopted a cautious approach, opting to wait for clearer economic signals amid shifting government policies. Notably, the meeting occurred prior to President Trump’s tariff reductions on China, which lowered rates from 145% to 30%.
The gold rally has stalled this week, pressured by a rebound in U.S. Treasury yields that bolstered the U.S. dollar. However, a surprise dovish tone in the Fed minutes—although less probable—could reignite bullion’s upward momentum.
In geopolitical developments, Fox Business News reporter Gasparino disclosed a near-finalized trade framework between the U.S. and India, reflecting a more flexible U.S. trade stance. Additionally, ongoing geopolitical tensions, including the Russia-Ukraine conflict and escalations between Israel and Hamas, continue to support gold’s safe-haven appeal.
Goldman Sachs analysts have recommended a higher-than-normal allocation to gold in long-term portfolios, citing risks to U.S. institutional credibility, central bank pressures, and persistent demand from global monetary authorities, according to Reuters.
Looking ahead, market participants will closely watch the second estimate of Q1 2025 GDP and the Fed’s preferred inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index.
Market Drivers:
U.S. Treasury yields climbed, with the 10-year note rising 4.5 basis points to 4.493%, while real yields advanced 4 basis points to 2.171%. The U.S. Dollar Index (DXY) strengthened by over 0.33% to 99.89, buoyed by the strongest Consumer Confidence growth in four years, per the Conference Board.
New York Fed President John Williams reiterated that inflation expectations remain well-anchored and emphasized the need to prevent inflation from becoming entrenched.
Gold imports to Switzerland from the U.S. surged to the highest April level since at least 2012. Meanwhile, China’s net gold imports via Hong Kong more than doubled in April compared to March, reaching their highest since March 2024.
Money markets currently price in a 45 basis points easing by year-end, according to Prime Market Terminal data.
Technical Outlook:
Gold has consolidated between $3,280 and $3,330 over the past four sessions, with bullish momentum waning. The Relative Strength Index (RSI) nears the neutral 50 line; a break below could trigger further declines.
For bulls to regain control, gold must surpass resistance at $3,300, then target $3,400 and the May 7 high of $3,438, with $3,500 in sight thereafter.
On the downside, a drop below $3,250 risks pushing prices toward the 50-day Simple Moving Average at $3,211 and the May 20 low of $3,204.
