Gold falls over 2% to three-week low on signs of easing US-China trade

By Al Mayadeen English
Source: Agencies
Today 16:04

Gold fell to a three-week low as easing US-China trade tensions boosted risk appetite.

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10-gram gold bars lie on display in Dubai, United Arab Emirates, in this October 9, 2012, file photo. (AP)

Gold prices dropped more than 2% on Tuesday, hitting a three-week low, as renewed optimism over US-China trade relations boosted risk appetite and weakened demand for traditional safe-haven assets. The decline comes ahead of a closely watched Federal Reserve policy meeting later this week.

Spot gold fell 2% to $3,899.94 per ounce as of 08:57 GMT, marking its lowest level since October 6. Meanwhile, US gold futures for December delivery declined 2.6% to $3,915.30 per ounce.

“Hopes of avoiding a full-out trade war between the US and China are driving a rally for risk-related assets like shares. On the other side, it’s negatively impacting the demand for safe-haven assets like gold,” said Ricardo Evangelista, analyst at ActivTrades.

On Monday, US President Donald Trump expressed confidence in reaching a trade agreement with China, announcing a series of trade and critical minerals deals with four Southeast Asian nations during talks in Malaysia.

Top US and Chinese economic officials reportedly finalized the framework of a trade deal over the weekend, which is expected to be discussed by Trump and Chinese President Xi Jinping during their meeting on Thursday.

Focus shifts to Federal Reserve policy meeting

Investors are now turning their attention to the Federal Reserve policy meeting, with a widely anticipated interest rate cut expected on Wednesday, while markets closely watch for any forward-looking signals from Fed Chair Jerome Powell regarding future monetary policy.

Gold, which offers no yield, typically benefits from lower interest rates as it becomes more attractive relative to interest-bearing assets. Despite gaining approximately 53% so far this year and reaching an all-time high of $4,381.21 on October 20, spot gold has now declined 3.2% this week alone.

Reflecting shifting sentiment, Citi analysts on Monday lowered their short-term gold price forecast to $3,800 per ounce from $4,000. Capital Economics also revised its longer-term outlook, projecting gold to fall to $3,500 per ounce by the end of 2026.

The gold price drop was mirrored across other precious metals. Spot silver fell 2.5% to $45.71 per ounce, its lowest level in over a month. Platinum slipped 3.3% to $1,538.50, while palladium dropped 3.3% to $1,356.00, also reaching a three-week low.

The broader retreat in the precious metals market reflects a shift in investor sentiment amid global trade optimism and upcoming central bank decisions.