International gold prices, which had climbed more than 50% this year, have started to lose momentum. The market has been in an adjustment phase since October 20, as investors take a cautious stance amid uncertainty over the United States and China’s latest trade talks.
Gold prices near $4,000 stall as traders await clear signals from the Fed and US-China trade truce talks(Unsplash)
According to Reuters, spot gold traded at $3,997.79 per ounce around 4:22 p.m. Eastern Time on October 31, down 0.7% from the previous session. On the COMEX exchange, December gold futures fell 5.7%, marking the biggest single-day drop in 12 years.
Fed’s Hawkish stance pressures gold
Much of the recent weakness comes from comments by Federal Reserve Chair Jerome Powell, who signaled that interest rate cuts are not guaranteed in December. Powell’s hawkish tone reduced expectations for a near-term rate cut, saying it is “not a done deal.”
When U.S. interest rates stay high, investors often prefer the dollar over gold, as gold does not offer interest earnings. This shift has put downward pressure on the precious metal after months of gains.
Limited gains from US-China summit
At the same time, traders remain uncertain about the outcome of the US-China summit held in Busan on October 30. The two sides announced limited progress, including a 10 percentage-point reduction in U.S. tariffs on Chinese goods and a one-year delay in China’s restrictions on rare earth exports. Still, experts say the agreement did not fully resolve trade tensions.
Chinese President Xi Jinping later stressed the importance of a “multilateral trade system” at the APEC summit, a remark seen by analysts as a subtle warning to Washington.
Also read: Gold prices back above $4,000 after plunging on easing safe-haven demand
Temporary stability in relations
Bloomberg reported that while the Busan meeting helped reduce short-term risks, it only “bought time” for both nations to adjust their economic ties. Relations, it said, are likely to remain “stable only for a few months.”
Analysts predict further adjustment
Market analysts expect the gold price adjustment to continue. Robert Rennie, an analyst at Westpac Bank, said that “hawkish rate-cut expectations, a US-China trade truce, and large outflows from gold exchange-traded funds (ETFs)” are all weighing on sentiment. He warned that gold could drop further, possibly reaching $3,750 per ounce.
Despite some support from ongoing global uncertainty, experts agree that gold’s sharp rally has entered a pause phase, as investors adopt a wait-and-see approach on both the Federal Reserve’s next move and the true impact of the US-China trade truce.
FAQs1. Why are gold prices declining despite being near $4,000?
Gold prices are falling due to a strong U.S. dollar and cautious comments from Federal Reserve Chair Jerome Powell, who signaled that an interest rate cut in December is not guaranteed. Higher rates make non-yielding assets like gold less attractive.
2. How did the US-China trade talks affect gold prices?
The US-China summit in Busan brought only partial progress, such as a small tariff reduction and a delay in rare earth export controls. Since major trade issues remain unresolved, traders are taking a wait-and-see approach, limiting gold’s upward momentum.
3. What is the gold price outlook for the coming months?
Analysts expect gold to remain in an adjustment phase. With hawkish Fed policies and reduced demand from ETFs, prices could drop further, potentially to around $3,750 per ounce, unless new geopolitical tensions boost safe-haven demand.