Gold prices edged higher during Thursday's Asian session, recovering modestly from monthly lows near US$3,270 per ounce, as the United States dollar retreated slightly from its Federal Reserve-driven surge and trade tensions between the U.S. and China resurfaced.
By 3:50 pm AEST (5:50 am GMT), spot gold was trading up $21, or 0.6%, at US$3,296.52 an ounce.
The recovery followed a sharp 1.5% drop on Wednesday, when hawkish messaging from the Fed propelled the dollar sharply higher against major currencies.
Gold’s decline had been driven by the Fed’s decision to leave interest rates unchanged at 4.25%-4.5% following its July meeting, with the accompanying statement highlighting “elevated uncertainty” linked to President Donald Trump’s trade tariffs.
Despite the hold, two Fed governors dissented, favouring a 25-basis-point cut. However, Fed Chair Jerome Powell remained cautious, saying: “We have made no decisions about September. We don’t do that in advance. We’ll be taking that information into consideration and all the other information we get as we make our decision,” dismissing calls from Trump to lower rates.
Markets interpreted Powell’s tone as hawkish. According to the CME FedWatch Tool, traders are now pricing in a 56.8% chance that the Fed will hold rates again in September, up from around 35% before the Fed’s decision.
However, in Thursday’s trading, the U.S. dollar rally lost steam amid renewed uncertainty over the extension of the U.S.-China trade truce.
The softer dollar was also attributed to profit-taking ahead of Friday’s closely watched U.S. nonfarm payrolls report. This follows robust economic data released Wednesday, including a 3% annualised GDP growth rate for Q2, above expectations, and a rebound in private-sector employment.
Meanwhile, the ADP report showed U.S. private employment rose by 104,000 jobs in July, recovering from a 23,000 loss in June and topping the forecast of 75,000.
