U.S.-China tariff relaxation sparks optimism, leading to gold's recovery from recent lows on strengthened risk appetite.
Gold Prices Recover After US-China Tariff Agreement Boosts Risk Appetite
Gold prices bounced back on Tuesday, as investors seized the opportunity following a recent dip that followed the metal's lowest level in over a week. The rebound occurred alongside a surge in risk appetite, sparked by an agreement between the United States and China to temporarily ease mutual tariffs, reducing the appeal of safe-haven assets like gold.
Gold prices rebounded! On Tuesday, spot gold climbed 0.5% to $3,250.50 per ounce by 04:58 GMT, after plunging a significant 2.7% in the previous session. US gold futures also rose, with a 0.9% increase to $3,255.30 reported by Al-Rai daily.
This turnaround happened shortly after a two-day round of negotiations in Geneva, where Washington and Beijing agreed to cut tariffs for a period of three months. The US reduced tariffs on Chinese goods from 145% to 30%, while China lowered tariffs on American imports from 125% to 10%. This move invigorated global equity markets and subdued safe-haven demand.
"The improved trade relations between the world's two largest economies have injected a shot of optimism into the market," said Tim Waterer, senior market analyst at KCM Trade.
As the focus now shifts to the upcoming US Consumer Price Index (CPI) report, due later today, investors are eager for new signals about the Federal Reserve's next policy moves. Currently, markets anticipate a 55 basis-point rate cut by the Fed before the end of the year, with potential action starting in September.
"If the inflation data doesn't reveal a decline, it could undermine the dollar's momentum, which might contribute to gold's future surge," Waterer explained.
Traditionally, gold is considered a safe-haven asset, thriving during economic or geopolitical uncertainties, and it generally benefits from lower interest rates.
Fun Fact: Did you know gold is traditionally used as a medium of exchange, jewelry, and electronics components? With its unique properties such as conductivity, malleability, and resistance to corrosion, gold remains a valued resource across various industries!
[1] Global equity markets surge on US-China trade deal
[2] Gold prices plummet following US-China tariff agreement
[3] Gold's safe-haven appeal wanes with easing trade tensions
Amidst the surge in global equity markets, investors may seek opportunities beyond safe-haven assets like gold, taking interest in the technology sector for potential investments. As the demand for safe-haven assets decreases with improved trade relations between the US and China, technology companies stand to potentially benefit. The recent US-China tariff agreement could influence investors to channel their funds into growth sectors, such as technology, rather than holding gold for safety.
