- Gold fell over 1% on Tuesday amid optimism of a likely US deal with China.
- The IMF downgraded its outlook for US and global growth.
- Trump stated that he had no intention of firing Fed Chair Powell.
Gold extended Tuesday’s decline as risk appetite improved after the US Treasury Secretary’s comments on the US-China trade war. Market participants now expect a de-escalation in the trade war, which is bearish for gold. At the same time, Trump halted his attacks on Fed Chair Powell, further improving investors’ sentiment.
Spot gold (Source: Bloomberg)
Gold fell over 1% on Tuesday after US Secretary Scott Bessent said there is progress towards a deal with China. At the same time, Trump expressed greater optimism about reaching an agreement and lowering tariffs on China. The comments eased concerns of an escalation in the trade war. At the same time, it reduced concerns about the global economy.
The trade war between China and the US has been a significant catalyst for gold in recent weeks. Trump’s tariffs on the country reached a high of 145%, while China pushed tariffs on US imports up to 125%. The two major economies have remained in a stalemate, with China not willing to negotiate a trade deal.
Moreover, China recently warned other countries against working with Trump at the expense of the Chinese economy. If the war continues, investors will continue to worry about the US and global economies. This will send more to buy the safe-haven yellow metal.
Recently, the IMF downgraded its outlook for US and global growth, citing Trump’s tariffs as the major reason. Meanwhile, analysts at JP Morgan believe gold will continue rising past the $4,000 price. This means demand for bullion will remain high.
Furthermore, gold prices dropped on Tuesday after Trump stated that he had no intention of firing Fed Chair Powell. The White House began attacking the Fed on Friday, saying that it was exploring ways to remove Powell from office. Trump has called for the Fed to lower interest rates and support the weak economy. However, Powell has kept rates at elevated levels, waiting to see the impact of Trump’s tariffs.
Meanwhile, market participants are awaiting the release of US PMI figures. These will show the state of business activity in the economy, guiding the Fed on future policy moves. Last week, the US released upbeat retail sales data that eased economic concerns. However, analysts believe Trump’s tariffs have had a negative impact on the economy.
