Gold plunges from record highs amid stronger Dollar and improved risk sentiment
Gold (XAU/USD) drifts lower on Tuesday after retesting its record high near $4,380 on Monday. The pullback comes as the US Dollar (USD) extends its recovery gains and traders lock in profits following an overextended rally. At the time of writing, XAU/USD is trading around $4,175, down more than 4% on the day and marking a five-day low.
An improved risk appetite is weighing on the Bullion as investors show cautious optimism amid hopes of easing trade tensions between the United States (US) and China. Increasingly positive headlines have fueled expectations that the 100% tariffs US President Donald Trump threatened to impose on all Chinese imports from November 1 may ultimately be avoided. The softer tone has lifted risk assets and added to the Greenback’s recent strength. Even so, uncertainty lingers, given Trump’s unpredictable rhetoric and the fragile nature of ongoing negotiations.
Nevertheless, the broader outlook for Gold remains constructive despite the pullback. Expectations of a dovish monetary policy shift by the Federal Reserve (Fed) continue to underpin the metal’s appeal, as lower interest rates reduce the opportunity cost of holding non-yielding assets. Meanwhile, the ongoing US government shutdown and lingering geopolitical and economic risks help maintain safe haven flows.
Source: FXstreet.com
