Gold prices tumbled more than 2% on Wednesday, retreating from recent highs as the Federal Reserve opted to hold interest rates steady and the US Dollar gained ground. The XAU/USD pair was last seen trading near $3,371, after peaking at $3,438 earlier in the session.
The Federal Reserve kept its benchmark rate unchanged at 4.25%–4.50% for a third consecutive meeting, citing persistent uncertainties surrounding economic growth, employment, and inflation. Chair Jerome Powell struck a balanced tone, reaffirming the Fed‘s readiness to act if economic conditions shift but maintaining that the current stance remains appropriate given the risks.
While Powell declined to prioritize either inflation or employment as the Fed’s immediate focus, he cautioned that ongoing US trade tariffs could prevent the central bank from fully achieving its dual mandate. His remarks reinforced a “wait-and-see” strategy that dampened risk appetite but offered no immediate cues for rate adjustments.
Investor sentiment was mildly supported by news that US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng will meet in Switzerland for high-level trade talks—the first such engagement since tensions flared. Despite this, the US Dollar edged higher as traders booked profits from recent Gold gains and rotated into the Greenback, weighing on XAU/USD.
Geopolitical Risks and Central Bank Demand Offer Long-Term Support
Despite the short-term pullback, Gold’s broader outlook remains underpinned by a backdrop of persistent geopolitical instability, including conflicts involving Russia-Ukraine, Israel-Hamas, and India-Pakistan. This has continued to sustain haven demand for bullion.
Central banks remain active buyers in the global gold market. The World Gold Council reported that in April, the People’s Bank of China added 2 tonnes of Gold to its reserves—marking a sixth consecutive month of accumulation and bringing its year-to-date total to 15 tonnes. Poland’s central bank added 12 tonnes, while the Czech National Bank increased its holdings by 2.5 tonnes.
Technical Outlook: Bulls Eye Rebound From $3,350 Support
Gold’s sharp drop has put the metal back below the $3,400 level, placing short-term momentum in question. The XAU/USD pair is currently trading within a narrow range between $3,350 and $3,400. A decisive break above $3,400 could open the door to a retest of the $3,450 resistance level, with bulls ultimately targeting the all-time high near $3,500.
On the downside, a breach below $3,350 would expose the May 1 cycle low of $3,202. Further losses could see the price test the 50-day Simple Moving Average (SMA) around $3,113.
Meanwhile, swap markets have priced in the Fed’s first 25 basis-point rate cut in July, with expectations for two additional cuts by year-end—potentially offering renewed tailwinds for Gold in the months ahead.
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