Gold prices partially recovered after a three-session consecutive decline, as bottom-fishing buying appeared in the context that the US Federal Reserve (Fed) kept interest rates unchanged but internally appeared many opposing views.
The precious metal at one point increased by 0.7% to over 4,580 USD/ounce, after falling 3.4% in the previous three sessions. The Fed's decision to keep interest rates unchanged on April 29 was predicted, but was accompanied by "hawkish" opposition from some policymakers, as they disagreed with the message in the post-meeting statement that the central bank could soon return to the interest rate cut roadmap.
The US bond market is under strong selling pressure, with 2-year term yields rising the most in a Fed-decided day since 2022. This development reflects investors increasing bets that the Fed may have to raise interest rates again due to prolonged inflationary pressure – a disadvantage to gold, which is a non-performing asset.
The Fed's 8-4 vote – for the first time since 1992 with up to 4 members opposing a decision by the Federal Open Market Committee (FOMC) – shows increasing divisions over policy prospects amid increasing uncertainty due to the war lasting for nine weeks.
Ms. Nicky Shiels, Director of Metal Research and Strategy at MKS PAMP, said: "The scenario of inflation and high interest rates is returning to the focus, driven by the Fed's tougher stance. The possibility of interest rate hikes is currently not fully appreciated by the market for gold.
Gold prices are likely to record their second consecutive month of decline in April, as the Middle East conflict pushed energy prices up sharply. The decline has deepened in recent days as the US-Iran negotiation process stalled and the energy flow through the Strait of Hormuz was almost completely interrupted. Since the end of February, gold prices have fallen by about 13%.
On Wednesday, President Donald Trump signaled that the US will continue to maintain naval blockades against Iranian ports to tighten revenue from oil exports and put pressure on Tehran to return to the negotiating table. Brent oil prices are currently trading around 120 USD/barrel, close to the highest level since June 2022.
The latest data from the World Gold Council (WGC) shows that central banks increased gold purchases at the fastest pace in more than a year in the first quarter, as falling prices triggered a wave of buying large enough to compensate for sales from some organizations.
Mr. Christopher Wong - a strategic expert at OCBC - said: "The current environment shows that caution is needed with gold prices, unless oil prices cool down. However, in the medium term, the outlook is still supported by demand from central banks and the trend of diversifying reserves.
As of 12:12 PM Vietnam time, spot gold prices increased by 0.11% to 4,552.57 USD/ounce. Silver prices increased by 2.3% to 72.89 USD/ounce, while platinum and palladium also simultaneously went up. The Bloomberg Dollar Spot index – a measure of USD strength – slightly decreased after increasing by 0.4% in the previous session.
