Gold prices fell sharply on Wednesday, retreating more than 2%, after the Federal Reserve held interest rates steady and risk appetite improved on news of upcoming trade talks between the United States and China. Spot gold (XAU/USD) was trading at $3,371 per ounce, down from an intraday high of $3,438.
At its third consecutive policy meeting in 2025, the Federal Reserve maintained its benchmark interest rate at 4.25%–4.50%, citing persistent economic uncertainty and heightened risks to both employment and price stability.
Fed Chair Jerome Powell, speaking at a press conference, reiterated a neutral policy stance, stating that current interest rate levels remain appropriate. He emphasized the Fed’s readiness to respond if conditions shift significantly but warned that ongoing tariffs could hinder the central bank’s ability to meet its dual mandate of stable prices and full employment.
“If either side of our mandate drifts significantly off course, we will assess which tools are most appropriate to bring it back into balance,” Powell said. When asked whether inflation or employment should take priority, he responded that it was too early to determine.
Market sentiment also improved after it was announced that U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng would meet in Switzerland to discuss trade issues. The news eased investor concerns over the long-running trade dispute, pushing the U.S. dollar higher as traders shifted away from safe-haven assets.
The stronger greenback put additional pressure on gold, which is priced in dollars. The U.S. Dollar Index (DXY) rose 0.13% to 99.52, while the yield on the 10-year U.S. Treasury note held steady at 4.291%. U.S. real yields, reflected in 10-year Treasury Inflation-Protected Securities (TIPS), remained flat at 2.029%.
Despite the recent pullback, gold continues to benefit from ongoing geopolitical tensions, including conflicts between Russia and Ukraine, Israel and Hamas, and rising friction between India and Pakistan.
Meanwhile, central banks remain active in the bullion market. According to the World Gold Council, the People’s Bank of China added two tonnes of gold to its reserves in April—the sixth consecutive monthly increase—bringing total holdings to 2,294 tonnes. The National Bank of Poland added 12 tonnes, lifting its total to 509 tonnes, while the Czech National Bank increased its reserves by 2.5 tonnes.
Krishan Gopaul, Senior Analyst for EMEA at the World Gold Council, noted that net gold purchases so far this year have reached 15 tonnes.
In the broader market, swap traders have priced in the Fed’s first 25 basis-point rate cut for July, with two more reductions anticipated by the end of the year.
Technical Outlook: Gold Remains Bullish Above Key Support
Technically, gold remains in a bullish posture but faces resistance near the $3,400 mark. A break above this level could open the door to a retest of $3,450, with a potential run at the all-time high of $3,500.
Conversely, a drop below $3,350 may trigger a decline toward the May 1 cycle low of $3,202. A break beneath that level could bring the 50-day Simple Moving Average (SMA) at $3,113 into play.
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