Leonhard Foeger | Reuters
The precious metal extended the day's losses slightly after the Federal Reserve voted to cut interest rates by a quarter point for the first time in over a decade, a highly-anticipated but widely-expected move.
Spot gold fell as much as 1% following the Fed's decision but quickly recovered most of the loss, down just 0.3% at $1,426.31 an ounce. U.S. gold futures were down 0.4% at $1431.30 an ounce.
Investors were expecting an interest rate cut by the Fed, as well as by other leading central banks, which would cut the opportunity cost of holding non-yielding gold. The expectation has the precious metal on track for a 1.5% gain for July.
"The metal looks strong for now. In the recent time it has been supported by falling government bond yields. Gold's next moves will be dependent on how dovish the Fed will be today," said Fawad Razaqzada, market analyst with Forex.com.
Fed funds rate futures had fully priced in an interest rate cut of 25 basis points. Backing a dovish policy tilt by the U.S. central bank's policymaking Federal Open Market Committee, U.S. consumer spending and prices rose only moderately in June, pointing to slower economic growth and benign inflation. Industrial and trading services group MKS PAMP said in a note has a "top-side target for bullion" at $1,450 an ounce.
"Aside from the FOMC meeting, there remain a number of ongoing risk events to provide price direction to bullion, namely the increasing likelihood of a no-deal Brexit and a lack of progress between the U.S. and China in trade negotiations," MKS PAMP said.
U.S. President Donald Trump warned China against waiting out his presidency before finalizing a trade deal, saying the outcome could be no agreement or a harsher one if he wins re-election in November 2020.
"So far, because of the fact (bond) yields have been falling and the technical structure has been bullish, traders have been happy to pick gold at the dips. But that could change today" after the Fed meeting, Razaqzada said.