- Gold fell as the US and China adopted softer stances on tariffs.
- Scott Bessent stated that trade talks with other countries were progressing well.
- Market participants are looking forward to US employment data.
Gold prices extended losses on Wednesday as risk appetite improved and demand for safe-haven assets dropped. The yellow metal fell about 1% on Tuesday after Trump put in place measures to ease the impact of ongoing automobile tariffs. At the same time, trade tensions between China and the US continued easing, weighing on gold.
Gold continued its decline from an all-time high hit last week on Tuesday. The decline came as the US and China adopted softer stances on tariffs. However, downbeat US data put a floor on declines.
Reports last week showed that the US acknowledged the unsustainability of the trade war with China. The US has imposed a 145% tariff on goods from China. Meanwhile, China has a 125% tariff on US goods. Trump said he was ready to reduce tariffs to 50% and move to negotiations. However, he was not ready to make the first move.
Meanwhile, China exempted some US goods from tariffs on Friday. The move indicated a willingness to start talks. A trade deal between the two countries would ease global recession fears, further hurting bullion.
Meanwhile, US Treasury Secretary Scott Bessent stated that talks with other countries were progressing well. He noted that India would be the first to sign a trade deal with the US. This news reduced the likelihood of a global trade war. Gold performs best in times of uncertainty. Therefore, a return to calm would be bearish for the yellow metal.
US job vacancies (Source: Bureau of Labor Statistics, Bloomberg)
Data on Tuesday revealed that job vacancies in the US came in below estimates at 7.19 million. The drop indicated weaker demand in the labor market. As a result, it supported expectations for a Fed rate cut. Trump has called on the Fed to cut interest rates. However, the Fed Chair is waiting for more evidence from economic data.
Consequently, market participants are looking forward to US economic reports this week. Major releases include GDP, inflation and employment. Policymakers will focus on the April employment figures. These might show the impact of Trump’s tariffs. A downbeat report will pressure the Fed to cut rates. That would be bullish for gold. On the other hand, if the labor market remains strong, rate cut bets will drop, weighing on gold.
