- US-China Trade Progress Reduces Safe-Haven Demand
- Softer US Inflation Data Fuels Fed Rate Cut Expectations
- Geopolitical Tensions Offer Modest Support to Gold Prices
Gold prices remained under pressure near their daily lows on Wednesday, as positive sentiment surrounding US-China trade relations continued to curb safe-haven demand. Despite the intraday decline, XAU/USD held firm above the $3,200 level during early European trading hours, with a softer US dollar helping to cushion further losses.
Optimism over easing trade tensions between Washington and Beijing has been a primary driver of risk-on sentiment. US President Donald Trump reaffirmed this stance, highlighting an “excellent” relationship with China and downplaying concerns over the reintroduction of steep tariffs. This upbeat outlook has undermined investor interest in traditional safe-haven assets like gold.
On the economic front, Tuesday’s US Consumer Price Index (CPI) report indicated softer inflation pressures, with headline CPI cooling to 2.3% year-over-year in April, down from the previous month’s 2.4%. Core CPI rose 2.8% annually, matching analyst forecasts. These figures strengthened market expectations for at least two Federal Reserve rate cuts in 2025, keeping the US dollar on the defensive after retreating from a one-month high.
With the prospect of lower interest rates, the dollar’s weakness has helped limit gold’s downside. Traders are currently pricing in approximately 56 basis points of Fed rate cuts next year, supporting the non-yielding metal amid otherwise bearish pressures.
Meanwhile, geopolitical risks continue to simmer, providing a backstop for gold prices. Russia and Ukraine are scheduled for high-level peace talks in Istanbul, marking the first such meeting since 2022. Additionally, tensions in the Middle East remain elevated after the Israeli military intercepted a hypersonic missile fired by Yemen’s Houthi rebels towards Tel Aviv, underscoring persistent regional instability.
With no major US economic data on Wednesday, focus shifts to scheduled speeches from Federal Reserve officials, which could provide fresh policy insights. Broader market sentiment and ongoing geopolitical developments are expected to dictate near-term gold price action.