Gold prices eased on Thursday even as experts believed it would be prudent to wait some follow-through selling before positioning further losses.
The yellow metal eased from its record highs touched recently as the dollar index rose sharply after the US Federal Reserve cut interest rates by 25 basis points on Wednesday.
A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies, thereby reducing demand.
Following comments from Fed Chair Jerome Powell indicating no immediate need for rapid rate adjustments, the US dollar is continuing its post-FOMC recovery, rising from its lowest point since February 2002.
A generally positive tone in the equity markets is seen as undermining the safe-haven commodity.
Fed rate cut
As widely expected, the US Fed cut its benchmark rate by 25 basis points, the first reduction since December.
This move places the overnight funds rate in a new range of 4.00%-4.25%.
The US central bank also signalled the likelihood of two additional rate cuts this year, citing concerns about a weakening US labour market.
Consequently, the non-yielding gold surged to a new all-time high on Wednesday, surpassing the $3,700 per ounce threshold.
However, prices fell after the dollar firmed.
Following the announcement, US Treasury bond yields and the US Dollar saw a strong recovery after a brief decline.
This rebound occurred as Powell indicated that inflation risks are skewed upwards.
Powell informed reporters that the central bank’s approach to interest rates would be determined meeting by meeting.
This statement subsequently impacted the non-yielding yellow metal, leading to a significant intraday reversal.
The US central bank, in conjunction with its policy decision, released revised economic forecasts, projecting economic growth of 1.6% this year, 1.8% in 2026, and 1.9% in 2027.
The Federal Reserve’s core PCE estimate, which excludes volatile food and energy prices, projects inflation at 3.1% this year, 2.6% next year, and 2.1% in 2027.
The long-term forecast remains consistent with the 2% target.
Geopolitics
Russia’s Ministry of Defence has stated that its forces are making progress in nearly all sectors of the special military operation zone.
German Chancellor Friedrich Merz has issued a warning that Russia is testing boundaries through violations of NATO and EU airspace.
Concurrently, Ursula von der Leyen, head of the European Commission, is advocating for the European Union to accelerate the cessation of Russian oil and gas imports.
The Israeli military continues its brutal offensive in Gaza City, which has garnered extensive international condemnation.
They have intensified the demolition of residential neighbourhoods through the increased use of booby-trapped armoured vehicles.
To exert pressure on Israel to conclude the 23-month-long conflict in Gaza, the EU is contemplating the imposition of tariffs and sanctions against extremist government ministers.
Market participants are now anticipating Thursday’s US economic data, specifically the Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index, to provide direction later in the North American trading session.
Gold price may see more correction
Gold may experience further profit-taking due to its daily Relative Strength Index (RSI) remaining in overbought territory.
“That said, the overnight bounce from the vicinity of a bullish flag pattern resistance breakpoint, now turned support, near the $3,645 region, warrants caution for the XAU/USD (gold/dollar) bears,” Haresh Menghani, editor at FXstreet, said in a report.
Therefore, it would be wise to anticipate additional selling below the specified level before anticipating further declines towards the $3,610-$3,600 range, Menghani said.
Conversely, an immediate hurdle could be the $3,678-$3,680 region, according to Menghani.
Beyond that, the $3,700-$3,707 zone, or Wednesday’s record high, could also act as resistance.
A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and should allow the gold price to build on the recent breakout momentum and prolong a well-established uptrend witnessed over the past month or so.
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