Gold Hits Two-Week Low as Easing Trade Tensions Boost Risk Appetite
Gold prices dropped nearly 2% to reach a two-week low on Thursday. This decline comes as hints of easing trade tensions have heightened risk appetite among investors, diminishing the precious metal’s appeal as a safe-haven asset. In addition, a robust U.S. dollar has put further pressure on gold prices.
Spot gold fell approximately 2% to $3,222.66 an ounce by 1129 GMT, marking its lowest point since April 15. Concurrently, U.S. gold futures declined by 2.7% to $3,230.80.
The dollar index saw a rise of 0.3%, thus making dollar-denominated gold more costly for buyers using other currencies. Giovanni Staunovo, an analyst at UBS, remarked, “There is ongoing hope that some trade deals are signed soon, allowing lower tariffs to stay.” He further noted that this optimism, coupled with a stronger dollar, is putting pressure on gold.
The U.S. administration recently hinted at possible trade agreements with countries including India, Japan, and South Korea. Additionally, there seems to be a “very good chance” of reaching a deal with China. The U.S. has reportedly approached China to discuss President Donald Trump’s 145% tariffs.
In economic news, the U.S. economy experienced its first contraction in three years during the first quarter, primarily due to a surge in imports as companies aimed to avoid impending higher tariffs.
Meanwhile, Federal Reserve policymakers have signaled that short-term interest rates would remain unchanged until there is concrete evidence of inflation approaching the central bank’s 2% target or signs of potential job market adversity. Investors are now eagerly waiting for the release of Friday’s nonfarm payrolls report, hoping it will provide deeper insights into the Fed’s policy strategy.
A softer payroll report might bolster calls for additional rate cuts by the Fed within the year, potentially allowing gold to rebound to $3,500 per ounce over the coming months, according to Staunovo from UBS.
Looking ahead, analysts involved in a recent quarterly poll anticipate an average annual gold price exceeding $3,000 for the first time.
Gold, often seen as a non-yielding asset and a hedge against political and financial instability, briefly touched $3,500 last week.
Other Precious Metals
Spot silver decreased by 1.8% to $31.99 an ounce. Meanwhile, platinum experienced a decline of about 1% to $956.63, and palladium rose by 0.3% to $941.10.
In summary, while global trade developments promise potential resolutions and reduced tariffs, the consequent boost in risk appetite, along with a stronger U.S. dollar, has contributed to the recent decline in gold prices. Market participants will be keenly observing further economic reports for direction on future trends in precious metal prices.
