GOLD PRICES reversed an overnight rally in London trade Thursday, steadying around $2300 per Troy ounce after giving back the $30 gained on yesterday's "no change" decision from the US Federal Reserve on Dollar interest rates.

 

Global stock markets regained 1/3rd of this week's previous 1.5% drop, and bond prices also rallied – pulling 10-year Treasury borrowing costs down to the lowest in a fortnight – after the Fed reduced the pace of its quantitative tightening but said it will keep short-term rates at today's 2-decade high "until it has gained greater confidence" that inflation is falling.

 

"Gold neutral," says brokerage StoneX's bullion specialist Rhona O'Connell, reviewing the Fed meeting.

 

"The FOMC came out much as expected with 'higher for longer' still the mantra" after that position was seemingly abandoned at the end of 2023.

 

But with Jerome Powell rejecting the idea of any further rate rises at Wednesday's press conference, "major central-bank policy [is] willing to accept 'higher for longer' inflation," adds Nicky Shiels at Swiss bullion refining and finance group MKS Pamp – a "collective turn" which "gold sniffs...amidst solid physical demand."

 

Wednesday's Fed statement and press conference followed surprise weakness in US manufacturing data as the ISM PMI survey – after stabilizing for the 1st time in 17 months in March – said activity shrank in April while input costs leapt, with prices paid coming in at the strongest since June 2022.

 

 

"I was around for stagflation. And it was 10% unemployment, it was high-single-digits inflation," said Powell during yesterday's Fed press conference referring to the 1970s and early '80s.

 

"Right now, we have 3% growth...and we have inflation running under 3%. So I don’t see the stag or the flation actually.”

 

 

The Fed's May statement repeated the opening paragraph from its previous decision in March, but added that while "Job gains have remained strong, and the unemployment rate has remained low...In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective."

 

Back in precious metals, the 3 largest bullion-backed trust funds all saw small outflows on Wednesday, with the GLD and IAU gold ETFs reversing more of their recent growth while silver's SLV fund shrank almost 0.6% to the smallest in over a week.

 

The silver price also reversed its overnight rally on Thursday before falling to new 4-week lows just above $26 per Troy ounce.

 

The UK gold price in Pounds per ounce steadied around £1840 while gold priced in Euros traded at €2150 – also a new record high when first reached at the start of April.