The gold price (XAU/USD) is trading in negative territory around $3,245 during the early Asian session on Wednesday. A boost in market risk appetite, driven by a recent tariff deal between the United States and China, is weighing on gold, traditionally viewed as a safe-haven asset. Market participants are now turning their attention to upcoming statements from Federal Reserve officials later on Wednesday.
US-China Trade Deal Supports Market Sentiment
After two days of negotiations in Geneva, the US and China, the world’s two largest economies, reached an agreement to reduce tariffs on each other’s goods. The US cut tariffs on Chinese imports from 145% to 30%, while China lowered tariffs on US goods from 125% to 10%. These positive developments have lifted market sentiment, further diminishing the demand for gold.
Easing Tensions Between India and Pakistan
Gold is also under pressure due to easing tensions between India and Pakistan. Following a ceasefire in Jammu and Kashmir and border towns, market participants are less inclined to seek safe-haven assets like gold. Indian Prime Minister Narendra Modi’s stern warning to terrorists and Pakistan, emphasizing India’s refusal to tolerate “nuclear blackmail,” has contributed to the decreased demand for gold.
Selloff in Gold and Silver
Gold and silver have experienced a significant selloff at the start of the week, fueled by optimism from the US-China trade deal. Following the announcement, the US Dollar Index (DXY) and US bond yields surged. As risk appetite increases, the demand for precious metals as a hedge against uncertainty diminishes.
Potential for Gold to Rebound
While the outlook for gold is currently negative, any escalation in tensions between India and Pakistan or renewed economic uncertainty triggered by US President Donald Trump’s tariff policies could reignite safe-haven demand, potentially benefiting the gold price. Investors will be closely monitoring these developments for signs of further volatility in the global markets.
