Gold prices fell in European trade on Thursday away from two-week highs on profit-taking, and under pressure from the rising US dollar.

The Federal Reserve maintained interest rates unchanged for the third straight meeting, pointing to rising inflation and unemployment concerns due to tariffs.

Prices

Gold prices fell 1.3% today to $3320 an ounce, with a session-high at $3414.

On Wednesday, gold fell 1.9%, the first loss in four days on profit-taking away from a two-week high at $3435.

The Dollar

The dollar index rose over 0.35% on Thursday for the second straight session against a basket of major rivals.

A stronger dollar makes greenback-denominated futures less attractive to holders of other currencies.

US dollar’s gains also come as recession concerns receded amid positive developments on trade negotiations, and amid a bullish stance by the Federal Reserve.

Trump’s Trade Deal

US President Donald Trump said he’ll announce a big trade deal with a “highly respectable country” in a new conference later today, the first of many such deals.

It’s likely to be a trade deal with the UK, which itself reached a free trade deal with India last week.

The Fed

In a step that wasn’t surprising, the Fed decided to maintain interest  rates unchanged at below 4.5%, due to ongoing economic uncertainty.

The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.

The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.

Most Fed policymakers believe the central bank is in a good position to hold off modifying policies until clear data presents itself.

The Fed’s decision comes as the US administration engages in intense talks with trade partners to reach deals within the 90-day pause on reciprocal tariffs that Trump provided.

Powell

Fed Chair Jerome Powell provided important remarks following the meeting:

- He expects higher short-term inflation

- Tariffs are the main mover of inflation forecasts

- Tariffs so far are much larger than expected

- Sustained tariffs will lead to higher inflation and less employment 

- Fed remains in a good position before changing policies

- Fed isn’t in a rush to cut interest rates

- He opened the door for more interest rate cuts this year is suitable

US Rates

Following the Fed meeting and according to the Fedwatch tool, the odds of a June 0.25% interest rate cut fell from 32% to 20%.

71% to 66%.

SPDR

Gold holdings at the SPDR Gold Trust fell 0.29 tons yesterday, the fourth drop in a row, to a total of 937.67 tons, the lowest since April 9.

Sterling rose in European trade on Thursday against a basket of major rivals, resuming gains after the dollar after a short hiatus, with a positive sentiment in the markets after US President Trump’s announcement of a “big trade deal” later today.

The gains come before the Bank of England’s monetary policy decisions later today, expected to cut interest rates by 25 basis points to 4.25%.

The Price

The GBP/USD rose 0.5% today to $1.3357, with a session-low at $1.3286.

On Wednesday, the pound lost 0.6%, the first loss in three days following the Fed’s meeting.

Trump’s Trade Deal

US President Donald Trump said he’ll announce a big trade deal with a “highly respectable country” in a new conference later today, the first of many such deals.

It’s likely to be a trade deal with the UK, which itself reached a free trade deal with India last week.

Bank of England

The Bank of England is widely expected to cut interest rates by 25 basis points to 4.25%, the lowest since March 2023.

Governor Andrew Bailey will talk later on the future of the fight with inflation and interest rates.

The Australian dollar rose in Asian trade on Thursday against a basket of major rivals, resuming gains against the US counterpart and approaching five-month highs once more after US President Donald Trump announced a big upcoming trade deal later today.

Recent Sydney data showed persistent inflationary pressures on Australian policymakers, hurting the odds of an Australian rate cut in May.

The Price

The AUD/USD pair rose 0.6% today to 0.6465, with a session-low at 0.6424.

The Aussie lost 1.1% against the US dollar on Wednesday, the first loss in four days on profit-taking away from a five-month high at 65.15.

Trump’s Trade Deal

US President Donald Trump said he’ll announce a big trade deal with a “highly respectable country” in a new conference later today, the first of many such deals.

It’s likely to be a trade deal with the UK, which itself reached a free trade deal with India last week.

Australian Rates

The odds of a 0.25% interest rate cut by the Reserve Bank of Australia stood at 85% in May.

The RBA held interest rates steady at 4.1% in April but opened the door for a cut in May.

Now investors await Australian inflation, unemployment, and wages data to gather more clues this month.

US stock indices rose on Wednesday after a volatile session as investors assess the Federal Reserve’s policy statements and upcoming US-China trade talks.

In a step that wasn’t surprising, the Fed decided to maintain interest  rates unchanged at below 4.5%, due to ongoing economic uncertainty.

The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.

The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.

Most Fed policymakers believe the central bank is in a good position to hold off modifying policies until clear data presents itself.

The Fed’s decision comes as the US administration engages in intense talks with trade partners to reach deals within the 90-day pause on reciprocal tariffs that Trump provided.

Recent data painted a worrying picture, with GDP contracting by 0.3% in the third quarter as imports surged with consumer and government spending reduced.

However, employment continued to grow strongly with the economy adding 177 thousand new jobs in April, while unemployment held at 4.2%.

On inflation, it continues to approach the Fed’s 2% target, but the tariffs could lead to a transient rise in prices.

On the trade front, the markets were boosted by reports about a meeting between US Treasury Secretary Scott Bessent and Chinese officials in Switzerland to discuss the tariffs and a potential trade agreement.

On trading, Dow Jones rose 0.7%, or 285 points to 41,114 points, with a session-high at 41,266.

S&P 500 rose 0.4%, or 24 points to 5631 points.

NASDAQ added 0.3%, or 48 points to 17,738 points, with a session-high at 17,820.