Gold Edges Higher as Markets Absorb Xi-Trump Truce and Lingering Policy Uncertainty

Gerik

Summary:

Gold prices rose up to 1.3% after recent losses, as investors responded to the Xi-Trump summit’s partial trade breakthroughs while continuing to hedge against unresolved Fed policy direction and global economic risk....

Relief Rally Driven by Partial Progress, Not Resolution

Gold resumed its upward trajectory on Thursday, gaining as much as 1.3% to reach $3,968.94 per ounce by late afternoon in Singapore. This rebound comes after bullion had slumped nearly 5% over four sessions, pressured by technical corrections and fading safe-haven flows. The turnaround reflects a reassessment of risk following the high-profile Trump-Xi summit in South Korea, where both leaders struck a conciliatory tone but offered only modest, time-limited concessions.

President Trump declared the meeting “amazing,” confirming that China would suspend rare earth export controls for a year and resume large-scale purchases of U.S. soybeans. Xi, in turn, signaled openness to cooperation in areas like trade, energy, and artificial intelligence remarks published via China’s state-run Xinhua News Agency. These moves suggest a temporary thaw, prompting markets to recalibrate geopolitical risk premiums.

Fed Policy Adds an Underlying Layer of Ambiguity

Traders also remain focused on the Federal Reserve’s interest rate trajectory, which continues to influence gold’s appeal. On Wednesday, Fed Chair Jerome Powell downplayed expectations for a December rate cut, despite delivering a quarter-point reduction as anticipated. Importantly, the central bank recorded dissents for a third straight meeting — a level of division not seen since 2019. These policy splits have fueled uncertainty, reinforcing gold’s role as a hedge against monetary unpredictability.

According to Charu Chanana, chief strategist at Saxo Markets, the summit signals “an early attempt to reset the U.S.–China narrative,” but the gold market is still “sniffing out uncertainty” amid conflicting monetary cues and geopolitical risks.

Structural Drivers of Gold’s Bull Run Remain Intact

Even after its recent correction, gold has advanced nearly 50% year-to-date. The rally has been supported by strong central-bank buying and a persistent investor pivot toward tangible assets amid widespread fiscal expansion. This behavior, often referred to as the “debasement trade,” reflects strategic shifts away from sovereign debt and fiat currencies due to concerns about long-term budgetary sustainability.

Schroders’ Sebastian Mullins emphasized that the breadth and depth of current monetary demand for gold distinguish this rally from past cycles. In other words, while day-to-day price movements may react to headlines, underlying structural demand remains robust.

ETF Outflows Suggest Cautious Profit-Taking

Despite Thursday’s rebound, recent outflows from gold-backed ETFs suggest a more nuanced investor outlook. According to Bloomberg data, total ETF holdings fell for a fifth straight day earlier this week, marking the longest streak of outflows since May. This trend may reflect short-term profit-taking or a tactical reallocation ahead of the Fed’s next signal.

Silver extended its gains for a third consecutive day, reflecting modest bullish sentiment, while platinum remained flat and palladium edged higher. Meanwhile, the Bloomberg Dollar Spot Index held steady, providing little additional pressure or relief to dollar-denominated commodities.

The Trump-Xi summit has sparked a partial recalibration in risk sentiment, offering gold some near-term support after a sharp correction. However, with core issues in U.S.-China economic rivalry unresolved and the Federal Reserve sending mixed signals, gold’s climb appears tied to broader uncertainty rather than renewed safe-haven panic. For now, gold continues to move in a zone of cautious optimism buoyed by central bank support and geopolitical hedging, yet tethered by incomplete progress on global trade and monetary policy coordination.

Source: Bloomberg

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