Gold falls below $4,000 on US-China trade optimism
Global markets recovered on Tuesday, pushing gold prices below the psychological level of $4,000 per ounce, settling around $3,930, reflecting a marked shift in investor appetite for risk at the expense of safe-haven assets.
Gold Headwinds: Trade Deal on the Horizon
The primary driver behind this decline is the wave of optimism sweeping the markets, with growing expectations that a trade agreement between the United States and China is imminent.
Senior economic officials from both sides held intensive talks on Sunday to finalize the framework for an agreement, which Presidents Trump and Xi are expected to announce later this week. This optimism has prompted investors to gradually shift away from gold and toward assets with potentially higher returns.
The announcement of new trade deals with countries in Southeast Asia during President Trump's Asia tour has also bolstered the image of a strong US economy, temporarily reducing the need to hedge against the yellow metal.
A Chance for Recovery? Dollar's Decline Offers Hope
Despite the pressures, a glimmer of hope for gold appears from another direction: the decline of the US dollar.
The weakness of the greenback makes buying gold denominated in other currencies less expensive, which could boost demand and support its recovery attempts in the coming sessions, especially with buyers looking to enter the market at these relatively low levels.
Critical Milestones on the Road to Recovery: Central Banks in the Field
The global monetary landscape still holds potential support factors for gold.
All eyes are on the US Federal Reserve's meeting tomorrow, Wednesday, where the market widely expects a 25 basis point interest rate cut.
This cut, if it happens, would make gold, a non-yielding asset, more attractive.
Investors will also be closely watching for any hints from Fed Chairman Jerome Powell regarding the future path of monetary policy, especially after last week's disappointing inflation data.
Meanwhile, both the European Central Bank and the Bank of Japan are expected to maintain their accommodative policies this week, maintaining a global liquidity environment that could support gold in the long term.
