• Gold continues to push higher and recently moved above $1900 as markets digest Wednesday’s Fed policy announcement.
• Fed’s Powell ruled out 75 bps rate hikes for the coming months, removing some downside risk for gold, analysts said.
• Focus now turns to Friday’s US jobs report.

Spot gold (XAU/USD) prices reclaimed the $1900 per troy ounce level on Thursday, hitting highs in the $1903.00s as precious metal bulls remained in control as markets continued to digest Wednesday’s not as hawkish as feared Fed policy announcement. While Powell was consistent in his message that rates will continue to rise rapidly as the Fed “expeditiously” moves policy back to a more neutral level to be in a better position to tackle inflation, the fact that he ruled out a 75 bps move in the meetings ahead has removed some downside risks for gold, analysts said.

At current levels just above the $1900 mark, XAU/USD trades with gains of well over 1.5% versus Wednesday’s pre-Fed announcement levels under $1870. Some analysts argued that the Fed’s refusal to entertain larger than 50 bps rate hikes in the coming months risks putting the bank further behind the curve with regards to tackling inflation, which could potentially be a positive for gold moving forward. But other noted that risks remain elevated that over the summer, should inflation fail to moderate as much as the Fed hopes it will, they could signal interest rates moving substantially above neutral in 2023, which could trigger a tightening in financial conditions (US yields and US dollar higher) and downside in gold.

In the more immediate future, gold traders will be focused on the upcoming release of the April US labour market report at 1330BST on Friday. If the report reveals further evidence of building wage pressures, this only adds to the upside inflation risks for the US economy this year and raises the risk of a substantial further hawkish shift from the Fed over the summer. In this scenario, XAU/USD could quickly hand back recent gains and test weekly lows at $1850. If not, and if the bulls can manage a more significant upside break of $1900, perhaps a test of the 21 and 50-Day Moving Averages in the $1920s-$1930s area is on the cards.