Gold prices dropped by more than 1% on Wednesday after confirmation of trade talks between the U.S. and China reduced the appeal of safe-haven assets. By 10:35 a.m. ET, spot gold had fallen 1.2% to $3,384.80 per ounce, with a peak drop of 2.1% earlier in the day. U.S. gold futures were also down 0.9%, trading at $3,391.70 an ounce.
This pullback followed an announcement late Tuesday that the U.S. and China would meet for formal trade talks for the first time since President Donald Trump imposed significant tariffs. Bart Melek, head of commodity strategies at TD Securities, told Reuters that the news ignited optimism in risk markets, as the two economic giants began discussions on tariff issues.
Despite escalating tensions in South Asia, where India conducted military strikes against Pakistan, investors largely overlooked the potential conflict. Normally, such geopolitical risks would drive demand for gold, but the easing of global trade tensions has taken precedence in market sentiment.
Gold’s Surge and Future Predictions
Gold has surged nearly 30% this year due to market volatility sparked by Trump’s aggressive trade policies. In late April, the price of the metal surpassed the $3,500-an-ounce mark for the first time, before experiencing a slight pullback as market sentiment improved. Experts, however, remain optimistic about gold’s future performance. Bank of America predicts that gold prices could push higher in the second half of 2025, potentially reaching $4,000 an ounce, while JPMorgan forecasts a similar price target by the second quarter of 2026.
Key Drivers of Gold’s Ascent
Several factors have driven gold’s rise, including central banks’ efforts to diversify their assets by purchasing more of the metal. In April, China added gold to its reserves for the sixth consecutive month, signaling continued interest in gold as a stable investment.
Market participants are also closely watching the Federal Reserve’s upcoming policy decision. While the Fed has previously indicated that it is in no rush to cut rates, many anticipate that no cuts will occur before July. TD’s Melek noted that if the Fed adopts a more hawkish stance than expected, gold could find strong support above the $3,100 mark.
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