Gold price pulls back as market sentiment improves

• Gold price pulls back on positive risk appetite, denting safe-haven demand. 
• Gold rose strongly on Wednesday after the Federal Reserve adopted an overall easing bias in its May meeting. 
• The precious metal was propelled higher after Federal Reserve Chairman Jerome Powell described more rate hikes as “unlikely”. 

The Gold price (XAU/USD) is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows. 

Gold price rallies after Federal Reserve meeting 

Gold price surged over $30 an ounce after the US Federal Reserve (Fed) adopted an overall easing bias at its May policy meeting on Wednesday. 

Gold bulls bid up the price after the Fed decided to leave interest rates unchanged and to slow the pace of reduction of its US Treasury holdings, a mildly dovish move as it unwinds quantitative tightening. 

Yet the Fed also added a hawkish phrase to its statement to reflect the continued stubbornness of US inflation, saying that, “in recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective.”

Concerns, however, that the Fed might actually consider raising interest rates – something that would be detrimental to non-yielding Gold – were allayed after the Federal Reserve Chairman Jerome Powell described such a move as “unlikely”. 

In his prepared remarks, Powell dropped any reference to reducing interest rates this year, and sidestepped questions about whether the Fed would still be cutting rates in 2024, in the Q&A. Yet, although the overall take-away was that rates were not coming down any time soon, additional rate-hikes were not on the table either. 

Technical Analysis: Gold price possibly unfolding Measured Move

Gold price (XAU/USD) has fulfilled the minimum requirement for completing its bearish Measured Move price pattern after hitting the Fibonacci 0.681 price objective for the final C wave at $2,286. This could mean prices will now track higher. 

XAU/USD 4-hour Chart

Measured Move patterns are composed of three waves that trace out a zig-zag. The end of the final C wave can be estimated based on the length of wave A. It is usually either equal in length to A or a Fibonacci 0.681 ratio of A. 

Directionally, Gold is in a bit of a no-man’s land: a break below the 0.681 Fibonacci target lows at $2,285 would be needed to confirm more downside to a target at $2,245 (1.000 or where A=C). 

Alternatively, a break above the cluster of Moving Averages and the peak of wave B at around $2,350 would potentially usher in a new more bullish environment. This could then see a retest of the $2,400 highs.

Additionally, the trend for Gold price is up both in the medium and long-term, overall supporting the outlook.