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- Gold prices declined by over 1% as China and the United States announced that high-level officials are scheduled to convene in Switzerland this weekend to discuss trade relations.
- China has implemented additional stimulus measures aimed at bolstering its economy, a development that typically supports gold prices.
- The upward trajectory of gold could potentially resume should tensions escalate between India and Pakistan, or if the forthcoming trade negotiations prove unsuccessful.
Gold (XAU/USD) experienced a decline of more than 1% on Wednesday, trading at $3,391 at the time of writing. This downturn precedes the Federal Reserve’s (Fed) impending interest rate decision and follows announcements from both China and the United States (US) confirming the resumption of trade discussions this weekend. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are scheduled to travel to Switzerland later this week to engage in trade talks with the Chinese delegation, which will be led by Vice Premier He Lifeng. The primary objective is to de-escalate the existing tariff dispute that poses a significant threat to both economies. According to Bessent’s statements on Fox News, the initial phase will not involve formal trade negotiations but rather focus on de-escalating the current strained situation. Market analysts suggest that a successful de-escalation could temper safe-haven demand for gold, contributing to the observed price decrease.
This announcement precedes the Federal Reserve’s rate decision, slated for Wednesday during the American trading session. According to the CME Fedwatch tool, there is a 95.6% probability that interest rates will remain unchanged. Consequently, a rate cut would represent a significant surprise to the market. Despite persistent pressure from US President Donald Trump on the Fed and its Chairman Jerome Powell to implement rate reductions, it appears unlikely that the Fed will succumb to political influence. The central bank is expected to maintain a steady course, closely monitoring the impact of existing tariffs on the US economy and inflation before making any adjustments to monetary policy. Recent economic data, including inflation figures and employment reports, are being carefully scrutinized by the Fed to assess the overall health of the economy and inform their decision-making process. The market widely anticipates that the Fed will provide forward guidance regarding its future policy intentions following the rate decision announcement.
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