Gold price declines as market sentiment improves

LONDON (May 2) The Gold price (XAU/USD) is trading in the $2,290s on Thursday after falling almost a percentage point on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows. 

Gold price rallies after Federal Reserve meeting 

Gold price surged over $30 an ounce after the US Federal Reserve (Fed) adopted an overall easing bias at its May policy meeting on Wednesday. 

Gold bulls bid up the price after the Fed decided to leave interest rates unchanged and to slow the pace of reduction of its US Treasury holdings, a mildly dovish move as it unwinds quantitative tightening. 

Yet the Fed also added a hawkish phrase to its statement to reflect the continued stubbornness of US inflation, saying that, “in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”

Concerns, however, that the Fed might actually consider raising interest rates – something that would be detrimental to non-yielding Gold – were allayed after the Federal Reserve Chairman Jerome Powell described such a move as “unlikely”. 

In his prepared remarks, Powell dropped any reference to reducing interest rates this year, and sidestepped questions about whether the Fed would still be cutting rates in 2024, in the Q&A. Yet, although the overall take-away was that rates were not coming down any time soon, additional rate-hikes were not on the table either. 

FXStreet