GOLD Analysis
Gold Slips to One-Month Low as Global Risk Sentiment Improves Amid US-China Trade Truce and Hawkish Fed Tone
Highlights
- Gold plunged nearly 3% to $3,215/oz as a US-China tariff truce and new US-UK trade deal bolstered risk sentiment.
- The Federal Reserve’s decision to hold rates steady—while warning of inflation and unemployment risks and ruling out preemptive cuts—weighed on the non-yielding metal.
- Reduced safe-haven flows followed a 90-day pause on new tariffs, India-Pakistan ceasefire, and stronger equities, pressuring gold to one-month lows.
Overview:
Gold prices declined sharply to around $3,215 per ounce, marking a near 3% fall and reaching the lowest level in a month, as a combination of easing geopolitical risks, improving trade sentiment, and hawkish monetary policy guidance from the Federal Reserve dampened demand for the safe-haven asset.
The decline was largely triggered by the positive developments surrounding US-China trade relations. Officials from both nations are scheduled to meet over the weekend in Switzerland, signaling potential progress in resolving the long-standing tariff conflict. The announcement of a mutual agreement to reduce tariffs and implement a 90-day pause on any new trade barriers has sparked optimism in global markets. This truce reflects a de-escalation in trade tensions, easing concerns of an imminent trade war and reducing the need for safe-haven assets such as gold.
Further contributing to the risk-on sentiment was the announcement of a new US-UK trade pact, which calmed global investors already fatigued by prolonged protectionist policies. Meanwhile, a ceasefire between India and Pakistan, two nuclear-armed neighbors, helped to reduce geopolitical uncertainties, further eroding demand for defensive assets.
In the United States, the Federal Reserve kept its benchmark interest rate steady, as widely expected. However, the accompanying commentary was less dovish than markets anticipated. The central bank highlighted rising risks linked to inflation and labor market volatility, reaffirming a cautious stance toward future policy easing. Fed Chair Jerome Powell explicitly stated that the central bank is not currently planning any preemptive rate cuts, which disappointed investors hoping for accommodative monetary measures in light of lingering macroeconomic concerns.
This hawkish tone added pressure on gold, a non-yielding asset, especially as the US dollar index strengthened, reducing gold’s appeal to foreign buyers. In addition, equities and other risk-sensitive assets saw renewed interest from investors, driven by optimism over global trade stabilization and strong corporate earnings in Europe and China.
From a technical standpoint, gold is now facing significant resistance around $3,275-80, while immediate support lies at $3,215. The market may remain volatile in the coming sessions as investors react to economic data releases, including Italian Industrial Production figures, and multiple speeches from FOMC members, which could offer more clarity on future policy directions.
The current setup presents a trading opportunity with a sell-on-rise strategy, where traders can consider selling around $3,275, targeting $3,200, with a stop-loss above $3,315, especially given the improved global risk sentiment and the Fed’s reaffirmed policy stance.
In conclusion, gold’s recent pullback highlights the metal’s sensitivity to both geopolitical developments and central bank policy narratives. With trade tensions easing and the Fed holding its ground, investors may continue to reduce their exposure to gold, at least in the short term, in favor of higher-yielding or risk-sensitive assets.