Gold Rebounds, What Will the China Deal Do?
Gold prices rose again after four consecutive sessions of decline. The precious metal briefly strengthened by 1.3% to near $3,982 per ounce, fueled by comments from US President Donald Trump after his meeting with Chinese President Xi Jinping. Trump called the meeting "extraordinary" and said tariffs on fentanyl would be immediately cut in half to 10%, while China was prepared to resume soybean imports and suspend rare-earth export licenses for one year. The issue of access to Nvidia's Blackwell chips was reportedly not discussed.
This deal is expected to ease trade tensions in recent months, although it does not address all the roots of the US-China economic rivalry. Analysts see this as an initial attempt at a "reset" by reopening some trade channels to restore confidence. On the other hand, gold still reflects market uncertainty regarding the Fed's gentle easing bias and lingering geopolitical risks.
Comments from Fed officials are also being weighed by market participants. Chairman Jerome Powell on Wednesday downgraded the odds of a December interest rate cut after the central bank cut 25 basis points as expected. The divided voices within the Fed—with dissent at three consecutive meetings—have made future policy signals increasingly unclear, especially given the lack of official data due to the US government shutdown. Higher interest rates are typically a drag on non-yielding gold.
Technically, last week's sharp rally, which briefly reached a record high above $4,380/ounce, was followed by a swift correction, indicating that the previous rally had overheated. Coupled with news of progress in US-China trade relations, gold's appeal as a safe-haven asset briefly eroded. Despite this, gold is still up around 50% year-to-date, supported by central bank buying and interest in the "debasement trade" to hedge against the risk of budget deficits.
At 1:30 p.m. Singapore time, spot gold rose 0.5% to $3,949.50 per ounce, while the Bloomberg Dollar Spot Index fell 0.1%. Silver and platinum were relatively flat, while palladium strengthened. Gold-backed ETFs experienced a fifth straight day of outflows—the longest since May—which has slightly diminished support from institutional and retail investors. Market participants are now awaiting the release of the World Gold Council's quarterly demand report on Thursday for clues on investor and central bank buying appetite going forward. (asd)
Source: Bloomberg
