XAU Prices Steady Ahead of US Federal Reserve Meeting

NEW YORK (May 2) On Tuesday, gold (XAU) prices remained relatively stable as investors awaited clues about future interest rates from the U.S. Federal Reserve’s policy meeting.

As of 10:53 GMT, XAU/USD was slightly higher at $1985.66, up $4.17 or +0.21%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $183.95, down $0.85 or -0.46%.

Gold Next Move Hinges Upon Fed’s Decision

The Federal Open Market Committee (FOMC) is scheduled to have a two-day meeting beginning on Tuesday, with many anticipating a 25 basis point rate increase. In contrast, a cautious tone in the Fed’s statement could potentially weaken the dollar, leading to an increase in gold prices. While gold is often considered a safeguard against economic uncertainties, higher interest rates can decrease demand for the asset, which has no yield. A weaker dollar makes gold cheaper for holders of other currencies.

ECB Rate Decision to Impact XAU Prices

It would also be prudent to monitor the European Central Bank’s meeting, which is anticipated to result in a 25 basis point rate hike. Any unanticipated decisions by the central bank could have an effect on the euro, which could, in turn, impact the dollar and ultimately influence gold prices. The ECB meeting is on Thursday.

Gold Underpinned by Banking Sector Fears

In April, gold prices increased by over 1% due to the U.S. banking crisis. On Monday, gold briefly exceeded $2,000 as a result of regulators seizing and selling First Republic Bank’s assets to JPMorgan Chase & Co. This transaction was made to resolve the largest U.S. bank failure since the 2008 financial crisis.

Bullish Traders Optimistic on Gold Prices

Traders who hold bullish views think that there is still a significant amount of potential for gold prices to increase even more. China’s consumer demand for gold and the constant purchasing from central banks in emerging markets provide a robust foundation of support for the physical price of gold.

FXStreet