Spot and futures gold prices were mixed during these moments of trading on Wednesday, as investors awaited the US Federal Reserve's decision on an expected interest rate cut, while optimism about a potential trade deal between the United States and China continued to support the strength of the dollar, keeping the precious metal near its lowest levels in three weeks.
Business optimism is limiting the appeal of gold.
Kelvin Wong, senior market analyst at OANDA, explained that the brief correction in gold prices was due to some investors shifting from safe-haven assets to equities, driven by optimism surrounding a potential trade agreement between Washington and Beijing. He added that the precious metal is facing short-term pressure due to corrective moves by short-term investors, as well as the break of some key technical levels.
Despite these pressures, Wong stressed that the fundamental factors remain supportive of gold in the long term, especially given the continued geopolitical tensions and economic concerns that fuel demand for safe-haven assets.
Over the weekend, top economic officials from China and the United States reached a preliminary framework for a trade agreement between US President Donald Trump and his Chinese counterpart Xi Jinping. The agreement aims to de-escalate US tariffs in exchange for China easing restrictions on rare earth exports. The two leaders are scheduled to meet in South Korea on Thursday.
The impact of interest rates and future expectations
A report from ANZ Bank indicated that progress in trade negotiations between the US and China is reducing demand for safe-haven assets like gold, as easing tensions has prolonged the price correction. The report added that this decline could present an opportunity for central banks to increase their gold purchases at relatively low prices.
The Federal Reserve is expected to cut interest rates by a quarter of a percentage point at the conclusion of its meeting today, Wednesday, as investors await remarks from Fed Chair Jerome Powell for clues about the future direction of monetary policy. Meanwhile, the European Central Bank is expected to leave interest rates unchanged at its meeting on Thursday.
It is well known that gold, which does not yield interest, typically thrives in environments characterized by low interest rates and economic uncertainty. The price of the precious metal has risen by approximately 52% since the beginning of the year, reaching a record high of $4,381.21 per ounce on October 20, fueled by geopolitical risks, expectations of interest rate cuts, and increased central bank purchases.
Gold at settlement yesterday
Gold prices fell at the close of trading on Tuesday, amid cautious optimism about trade talks between the United States and China, and as investors awaited the Federal Reserve's decision on interest rates.
Gold futures for December delivery fell 0.91%, or $36.60, to $3,983.10 an ounce, closing below $4,000 an ounce for the first time since October 9.
Gold and the dollar now
Spot gold rose 0.2% to $3,961 an ounce, after falling on Tuesday to its lowest level since October 7.
