Gold Consolidates Below $4,000 as Trade Truce Dents Haven Appeal

Singapore – Gold traded firmly below the psychologically significant $4,000 an ounce level on Tuesday, stabilizing after a sharp selloff as renewed diplomatic progress between the United States and China dampened immediate demand for safe-haven assets.

Spot gold was last seen at $3,972.69 an ounce, slightly weaker on the day and following a substantial 3.2% decline in the previous session. The pullback was triggered by positive developments from the latest round of US-China trade talks, where negotiators announced agreements on key issues, including tariffs and export controls, easing fears of a renewed trade war that had previously driven investors toward gold.

A Pause in a Meteoric Rally

The current softness marks a decisive retreat from the metal’s recent peak. Just last Monday, gold scaled a record high above $4,380 an ounce, capping a blistering rally. Despite the recent pressure, the precious metal remains up more than 50% for the year. This sustained strength has been underpinned by two dominant themes: relentless buying from global central banks and the burgeoning “debasement trade,” where investors shun sovereign debt and traditional currencies in favor of hard assets to hedge against concerns over soaring government budget deficits.

“While gold continues to make lower lows and futures volumes remain elevated on down days, calling the bottom is a tough ask,” said Chris Weston, head of research at Pepperstone Group Ltd., in a client note. “For now, it makes more sense to let others do the hard work and tactically buy a rip after the dip.”

A Divided Market Watches for a Deeper Correction

The metal’s rapid ascent and subsequent volatility have been a central topic of discussion at the London Bullion Market Association’s annual precious metals conference in Kyoto, the industry’s premier gathering.

The sentiment among professionals appears mixed. John Reade, a market strategist at the World Gold Council, noted that while central bank demand remains a pillar of support, it may not be as fervent as before. He suggested that a deeper price correction might actually be welcomed by professional dealers and fabricators who have been struggling with high and volatile input costs.

However, for other market participants, a dip is not a signal to sell, but to buy. A representative for South Korea’s central bank, which has not added to its bullion reserves in over a decade, indicated at the Kyoto conference that the institution is actively considering new purchases over the medium- to long-term, viewing any significant price drop as a strategic entry point.

Analysts See Further Downside in the Near Term

The short-term outlook, however, is tilting toward further weakness. Analysts at Citigroup Inc., including Max Layton, believe a confluence of factors could propel gold lower in the coming weeks.

“The US’ pivot toward deal-making with China, alongside a shift in gold-price momentum and a possible end to the US government shutdown, is set to propel the metal lower,” they wrote in a note on Monday. Citi forecasts that bullion could fall to around $3,800 an ounce over the next three months.

Broader Market Context and Key Events Ahead

The weakness in gold came despite a slight drop in the US dollar, which typically moves inversely to bullion. The Bloomberg Dollar Index dipped 0.2%, a move attributed to Treasury Secretary Scott Bessent’s discussions on exchange rates with Japan’s Finance Minister.

In other precious metals, silver declined again after losing 3.7% on Monday. Platinum also edged lower, while sister metal palladium managed to climb.

All eyes are now on the US Federal Reserve, which is widely expected to cut interest rates by a quarter percentage point at the conclusion of its two-day policy meeting on Wednesday. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, often providing a tailwind.

Adding a layer of political uncertainty to the market, the process to succeed Fed Chair Jerome Powell is heating up. Treasury Secretary Bessent confirmed the shortlist has been narrowed to five candidates: current Fed Governors Christopher Waller and Michelle Bowman, former Fed Governor Kevin Warsh, White House National Economic Council Director Kevin Hassett, and BlackRock Inc. executive Rick Rieder. The choice of the next Fed chief could significantly influence long-term monetary policy and, by extension, the trajectory for gold.

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