Gold prices steadied in Asian trading on Tuesday after a de-escalation of trade tariffs between the U.S. and China sparked optimism and triggered sharp declines in the yellow metal’s value. However, bullion prices found some stability as markets remained cautious about the potential for further trade easing, while anticipation of key U.S. consumer inflation data added pressure.
Despite this, gold’s potential for a major recovery was hindered by a strong rebound in the U.S. dollar, driven by positive sentiment surrounding the U.S.-China trade deal.
Spot gold remained flat at $3,236.95 an ounce, while June gold futures increased by 0.4%, reaching $3,240.42 per ounce at 00:26 ET (04:45 GMT).
U.S.-China Trade Deal Dampens Safe-Haven Demand
Gold prices took a significant hit on Monday following an announcement that the U.S. and China would substantially reduce trade tariffs over the next 90 days, following high-level talks in Geneva. Under the new agreement, the U.S. will lower its tariffs on China from 145% to 30%, while China will reduce its tariffs on U.S. goods from 125% to 10%.
This deal fueled optimism regarding a possible resolution to the ongoing U.S.-China trade war, triggering widespread buying of risk-driven assets. Equities, in particular, saw a boost, with major U.S. stock indices surging between 2.5% and 4.5% on Monday.
As a result, safe-haven assets like gold, which had benefitted from previous uncertainty over the trade conflict, experienced a sharp decline. The dollar also saw substantial gains, further weighing on gold prices due to increased optimism about the U.S. economy.
Other Precious Metals and Industrial Metals Show Mixed Movements
Despite gold’s struggles, other precious metals showed signs of recovery on Tuesday, though they remained well below prior session levels. Platinum futures rose 0.5% to $982.65 per ounce, while silver futures jumped 1.7% to $33.163 per ounce.
Industrial metals also saw gains, buoyed by the easing of U.S.-China trade tensions, which improved the economic outlook and raised expectations for higher demand. Copper futures on the London Metal Exchange gained 0.4%, reaching $9,519.35 per ton, while U.S. copper futures rose by 0.1% to $4.6335 per pound.
U.S. CPI Data Under Close Scrutiny
The focus now shifts to the U.S. consumer price index (CPI) data, set to be released later on Tuesday. Analysts expect the CPI to show persistent inflation, particularly as higher U.S. tariffs have contributed to rising prices across various sectors.
The CPI report could provide further insights into the strength of the U.S. economy and influence expectations regarding future interest rate decisions by the Federal Reserve. Goldman Sachs, for its part, downgraded its forecast for interest rate cuts in 2025, now predicting only one rate reduction this year, down from previous expectations of three.
The upcoming inflation data could have a significant impact on the dollar’s strength and, consequently, on the outlook for gold prices.
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