- Gold prices are trading in negative territory, hovering around $3,235 during Tuesday’s Asian trading session.
- The United States and China have reportedly agreed to de-escalate their ongoing trade dispute by implementing a temporary reduction in import tariffs on goods from both nations for a period of 90 days.
- Market participants are keenly awaiting the release of the US Consumer Price Index (CPI) inflation report for April, scheduled for release later today.
The price of Gold (XAU/USD) is experiencing a slight decline, currently trading near $3,235 in the early hours of the Asian trading session on Tuesday. The precious metal is facing downward pressure due to a strengthening US Dollar (USD), rising US Treasury yields, and increased optimism surrounding the potential for a resolution in the trade negotiations between the US and China. Investors are now focusing on the upcoming US April Consumer Price Index (CPI) report, which is expected to provide further insights into the current inflationary environment and potentially influence the Federal Reserve’s monetary policy decisions. The CPI data will be closely scrutinized for indications of whether inflationary pressures are easing or persisting, which could have significant implications for gold’s appeal as an inflation hedge.
The improvement in overall market risk sentiment, spurred by the announcement of a provisional agreement between the United States (US) and China to temporarily lower tariffs, has diminished the attractiveness of traditional safe-haven assets, including the Gold price. According to the preliminary agreement, the US will reduce the additional tariffs imposed on Chinese imports in April of this year from 145% to 30%, while China will decrease its duties on US imports from 125% to 10%. These revised tariff measures are slated to remain in effect for a 90-day period, during which further negotiations are expected to take place to reach a more comprehensive and lasting trade agreement. The market is cautiously optimistic that this de-escalation could lead to a more stable global economic outlook.
“The de-escalation of tensions between China and the US is reducing the demand for safe haven assets like gold,” remarked Giovanni Staunovo, an analyst at UBS, a Swiss bank and London bullion clearer. This sentiment reflects the broader market view that reduced geopolitical and economic uncertainty tends to diminish the appeal of gold as a store of value. Investors are now re-evaluating their asset allocations, shifting towards riskier assets that stand to benefit from improved trade relations and a more robust global economy. The impact of this shift on gold prices will likely depend on the extent to which the US and China can sustain their commitment to de-escalation and ultimately reach a mutually agreeable trade deal.
