Gold Price Forecast: XAU/USD tumbles below $3,300 on progress in US-China trade talks
- Gold price faces some selling pressure to around $3,275 in Monday’s early Asian session.
- US and China cite progress in trade talks, undermining the Gold price.
- Persistent geopolitical and trade-related uncertainties might help limit the Gold’s losses.
The Gold price (XAU/USD) attracts some sellers to near $3,275 during the early Asian session on Monday, pressured by a stronger US Dollar (USD). Optimism in US-China trade talks in Geneva, Switzerland, over the weekend has dragged the precious metal lower.
The US and China reported “substantial progress” after two days of talks in Switzerland aimed at de-escalating a trade war. China's Vice Premier He Lifeng described trade talks with US officials as “an important first step” in stabilising bilateral trade relations. Additionally, US Treasury Secretary Scott Bessent said the two sides made “substantial progress. Nonetheless, traders will keep an eye on the US-China trade talks details, which the US will share detail on Monday.
The specific measures from the world’s two largest economies could undermine the safe-haven demand. On the the hand, trade-related uncertainties might help limit the yellow metal’s losses. "Obviously, the overall continued uncertainty in regards to tariffs remains probably the most significant underpinning behind gold," said David Meger, director of metals trading at High Ridge Futures.
Additionally, persistent geopolitical risks could lift the Gold price even as India-Pakistan military activity tapered following reports of a ceasefire. India and Pakistan have both claimed victory after a ceasefire was declared over the weekend, which brought the two nuclear-nations back from the brink of war.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.