Gold prices stabilized in Asian trading on Tuesday after the de-escalation of tariffs between the US and China, which increased risk appetite and caused a sharp drop in the value of the precious metal. This is reported by Investing, writes UNN.
Details
However, gold prices found support as markets remained tense due to further possible de-escalation of trade tensions, as well as expectations of key US consumer price inflation data, which also dampened sentiment.
However, any significant recovery in gold prices was limited by the strengthening of the dollar, which jumped sharply on the news of a trade agreement between the US and China.
Spot gold remained unchanged at $3,236.95 per ounce, while gold futures for delivery in June rose 0.4% to $3,240.42 per ounce as of 00:26 AM Eastern Time (04:45 GMT).
Gold is losing ground due to the US-China deal, which reduces demand for protective assets
Gold fell sharply on Monday after Washington and Beijing announced a significant reduction in mutual trade tariffs for the next 90 days following positive high-level talks in Geneva.
The US will reduce tariffs on Chinese goods to 30% from 145%, while China will reduce its tariffs on American goods to 10% from 125%.
This announcement sparked optimism about further de-escalation in the ongoing trade war between the US and China, and also led to a massive buying of risky assets. The main beneficiaries were stock markets — Wall Street indices rose by 2.5–4.5% on Monday.
This trend has led to a decrease in demand for protective assets, including gold, which previously benefited from rising tensions in trade relations between the US and China.
Gold was also affected by a sharp strengthening of the dollar, which was caused by growing optimism about the US economy amid news of tariff de-escalation with China.
Other precious metals also rose on Tuesday, but recovered from sharp losses in the previous session. Platinum futures rose 0.5% to $982.65 per ounce, and silver futures rose 1.7% to $33.163 per ounce.
Industrial metals remain in a positive trend due to improved prospects for the global economy amid easing trade tensions. Benchmark copper futures on the London Metal Exchange rose 0.4% to $9,519.35 per tonne, and US copper futures added 0.1% to $4.6335 per pound.
US CPI inflation - in the spotlight for further economic signals
The main focus is now on the US Consumer Price Index (CPI) data, which is due to be released later on Tuesday. They will provide additional signals about the state of the world's largest economy.
CPI inflation is expected to remain high compared to the previous month, especially given the rise in prices caused by higher US trade tariffs.
This data may affect both the dollar exchange rate and expectations regarding future interest rate decisions by the Federal Reserve System - and this is closely related to the outlook for gold.
Goldman Sachs said on Tuesday it expects only one rate cut from the Fed this year, compared to previous forecasts of three cuts.
Let us remind
The US and China have agreed to temporarily reduce tariffs on each other's goods. This is done to ease trade tensions and allow time to resolve disputes.