- Gold price experiences downward pressure, trading near $3,235 during Tuesday’s Asian trading session.
- The United States and China have reached an agreement to de-escalate their ongoing trade dispute by implementing temporary reductions 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 later today.
The price of Gold (XAU/USD) is exhibiting a slight decline, hovering around $3,235 in early Asian trading on Tuesday. Several factors are contributing to the precious metal’s current defensive stance, including a strengthening US Dollar (USD), a rise in US Treasury yields, and increased optimism surrounding the interim trade agreement between the United States 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 state of the US economy and potential future monetary policy decisions by the Federal Reserve. The CPI data will be closely scrutinized for indications of inflationary pressures, which could influence the Fed’s stance on interest rate adjustments in the coming months.
The improvement in overall market risk sentiment, spurred by the announcement of a temporary agreement between the United States and China to lower tariffs, has exerted downward pressure on safe-haven assets such as Gold. The agreement stipulates that the US will reduce the additional tariffs imposed on Chinese imports in April of this year from 145% to 30%, while China will lower its duties on US imports from 125% to 10%. These measures are slated to remain in effect for a period of 90 days, providing a window for further negotiations and potential resolution of the broader trade dispute. The initial market reaction suggests a reduced demand for safe-haven assets as investors become more willing to embrace riskier investments amid hopes for a more stable global trade environment.
“The de-escalation of tensions between China and the US is reducing the demand for safe haven assets like gold,” commented Giovanni Staunovo, an analyst at UBS, a Swiss bank and London bullion clearer. Staunovo’s assessment reflects the broader market sentiment, where the easing of trade tensions is seen as a positive development for global economic growth, thereby diminishing the appeal of traditional safe-haven investments like gold. This shift in investor preference is contributing to the current downward pressure on gold prices, as market participants reallocate their capital towards assets perceived to offer higher growth potential in a more stable economic environment. The impact of this de-escalation on long-term gold prices remains to be seen and will depend on the sustainability of the US-China trade truce and the overall global economic outlook.
