Gold prices dropped to a one-week low overnight as the US dollar rebounded after the Federal Reserve reduced expectations of a rate cut this year, with the safe-haven metal also pressured as the central bank signalled strong economic growth.
Spot gold slipped 0.6 per cent to $US1,276.36 per ounce, after falling as much as 0.8 per cent to a session low of $US1,272.74 earlier, its lowest since April 24.
US gold futures settled 0.1 per cent lower at $US1,284.20 an ounce.
The US central bank held interest rates steady and signalled little appetite to adjust them any time soon, taking heart in continued job gains and economic growth and the likelihood that weak inflation will edge higher.
The US dollar bounced back up following the announcement, having declined for the previous three sessions.
A stronger US dollar makes gold, which yields no interest, expensive for holders of other currencies.
“The fears of a possible rate hikes were gone, that was positive for gold, then the press conference started and all the stuff came out all at once that shook up traders’ thoughts,” said George Gero, managing director at RBC Wealth Management.
The labour market remains strong and the economic activity rose at a solid rate in recent weeks, the Fed said in a policy statement.
That weighed on gold, which is often used as an alternative for political and financial risks.
“That was quite a quick reversal for gold, it had to do with the lack of inflation according to (Fed Chairman Jerome) Powell, less worries about Brexit and on the report that there could be a deal with China, which rattled gold traders,” Gero added.
The United States and China are nearing a trade deal, Politico reported on Wednesday after US Treasury Secretary Steven Mnuchin said the two sides completed “productive” talks in Beijing.
“We have economic numbers that are fairly well supported, equity markets are strong, gold doesn’t tend to perform particularly well in these situations as opportunity cost is associated with holding the zero-yielding asset,” said Bart Melek, head of commodity strategies at TD Securities in Toronto.
US private employers added 275,000 jobs in April, well above economists’ expectations and the most since last July, a report by a payrolls processor showed on Wednesday.
Among other metals, silver fell to a more than four-month low of $US14.57, while platinum prices dropped 2.8 per cent to $US861.50, its lowest in nearly a month.
Palladium slipped 2.8 per cent to $US1,349.50 per ounce after touching its lowest level since January 25 at $US1,309.67.