Gold Rises on Trade Truce Hopes and Fed Uncertainty, But Long-Term Market Ambiguity Lingers

Gerik

Summary:

Gold rebounded up to 1.3% after President Trump’s comments on his “amazing” meeting with Xi Jinping sparked cautious optimism, though the lack of a sweeping trade deal and lingering Fed policy division kept markets wary...

Trump-Xi Summit Provides Short-Term Relief, Not Resolution

Gold prices climbed as much as 1.3% to hover near $3,982 an ounce in early Thursday trading, following a string of losses that saw bullion drop nearly 5% across the past four sessions. The uptick came in response to President Donald Trump’s remarks after his high-profile meeting with Chinese President Xi Jinping, where the two sides agreed on several limited trade measures, including halving fentanyl-related tariffs and suspending China’s rare earth export licensing for a year.

Despite describing the talks as “amazing,” Trump acknowledged that the much-discussed U.S. offer to grant China access to Nvidia’s Blackwell AI chips was not part of the negotiation. This omission helped preserve the national security narrative but limited the depth of technological compromise in the trade package.

Bullion Reacts to Policy Hints Rather Than Policy Structure

While the market responded positively to the temporary resolution of key trade tensions, the overall deal fell short of addressing core structural issues in U.S.-China economic competition. As noted by Saxo Capital strategist Charu Chanana, gold’s recent volatility suggests traders are parsing not just geopolitics but the broader macroeconomic backdrop including a perceived dovish tilt from the Federal Reserve despite mixed signals.

Indeed, the Federal Reserve’s most recent quarter-point rate cut was expected, but Chair Jerome Powell’s strong statement that a December cut was “far from” guaranteed introduced renewed uncertainty. This divergence in Fed sentiment which included dissent from several members for the third consecutive meeting highlights a correlation between internal central bank fractures and volatility in non-yielding assets like gold.

Safe-Haven Demand Still Underpins the Bull Market

Although the gold rally has cooled since hitting a record high of over $4,380 an ounce last week, it remains up around 50% year-to-date. Much of this performance has been supported by sustained central-bank demand and a growing shift among institutional investors toward what’s been dubbed the “debasement trade” reallocating from sovereign debt and currencies to hard assets in response to surging fiscal deficits globally.

This trend continues to offer gold structural support, even as technical indicators suggest the metal had entered overbought territory prior to its recent correction. Analysts like Sebastian Mullins of Schroders maintain that the current cycle is fundamentally different from previous bull markets, driven by broader and deeper monetary demand from both official institutions and retail investors.

ETF Outflows Reflect Short-Term Hesitation

However, the recent pullback has shaken some investor confidence. Bloomberg data shows gold-backed ETF holdings declined for a fifth consecutive day on Tuesday, the longest streak since May. This suggests that while the broader macroeconomic narrative remains favorable to gold, positioning is temporarily sensitive to headlines, especially around U.S.-China trade diplomacy and Federal Reserve direction.

The Bloomberg Dollar Spot Index dipped 0.1%, offering modest support to dollar-denominated commodities. Spot gold settled around $3,949.50 an ounce by early afternoon in Singapore. Meanwhile, silver and platinum were relatively unchanged, and palladium posted a minor gain a signal of selective optimism rather than broad-based momentum across the precious metals complex.

Looking Ahead: WGC Report and Rate Path Clarity

Investors now await the World Gold Council’s quarterly demand report, which could provide further clarity on institutional and central bank interest. Additionally, upcoming economic data and clearer signals from the Fed will likely play a crucial role in determining gold’s next major directional move. If the Fed remains divided and trade negotiations stagnate, gold could continue to attract flows but without decisive policy shifts, the rally may remain range-bound in the short term.

Gold’s rebound reflects a temporary easing of geopolitical risk following the Trump-Xi summit, but the modest scope of the trade deal and growing ambiguity around Fed policy underscore that uncertainty remains deeply embedded in global markets. For now, bullion continues to navigate a complex landscape of monetary speculation, political theatre, and shifting investor sentiment.

Source: Bloomberg

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