Gold loses appeal as US—China tension eases

Gold has had a record-setting year, which was proof that investors all over the world were succumbing to uncertainty over the tit-for-tat tariff war and its impact on the economy. They were flocking to gold as a safe haven from the broader market volatility. 

The precious metal has surged by more than 25% this year, a relatively better performance compared to the S&P 500, which is currently down about 6% year-to-date.

However, Monday saw gold beat a hasty retreat for two major reasons. The first is due to easing US-China trade tensions, which positively affected investors’ risk appetite. The second reason is the reduced demand for the precious metal in the face of increased dollar strength.

Gold retreats after months of considerable upward momentum

According to TradingView, spot gold fell by over 0.8% and currently rests around $3,278.7 an ounce. Bullion hit a record high of $3,500.05 on April 22.

This fall can also partially be attributed to souring investor sentiments toward the so-called safe-haven assets.

Bitcoin, which was touted as the digital version of gold, was briefly considered a safe haven by many and an established hedge against inflation, has also seen several huge swings, some that put it above $100k and others that dragged it lower.

Even US Treasurys, famously considered almost risk-free assets backed by the US government, haven’t been able to remain stable amid the market’s movements, thanks partly to Donald Trump’s brand of politics. Things came to a head when the president insinuated threats to dismiss the Fed chair, causing a flight from US haven trades.

“It’s probably fair to say that financial markets and risk-assets in particular are feeling slightly better about the tariff picture now compared to the frantic first week in April,” KCM Trade Chief Market Analyst Tim Waterer said.

Comments made last week from the White House have also had investors feeling optimistic about a US-China trade deal instead of an all-out trade war.

The deal between the US and China is still up in the air

US President Donald Trump has stated that talks on tariffs were taking place with China. This information comes days after the Trump administration also signaled a willingness to de-escalate the trade war between the world’s largest economies.

China quickly denied Trump’s assertion that negotiations were happening, even though the Asian powerhouse exempted steep tariffs on some US imports on Friday.

Also, on Sunday, US Treasury Secretary Scott Bessent refused to back Trump’s assertion, and he would know because he has been presented as a key player in the US trade talks with multiple countries.

While he admitted that he interacted with his Chinese counterparts last week during International Monetary Fund meetings in Washington, he said they did not mention tariffs.

“I had interaction with my Chinese counterpart, but it was more on the traditional things like financial stability, global economic early warnings,” he revealed on ABC’s “This Week.”

“I don’t know if President Trump has spoken with President Xi, I know they have a very good relationship and a lot of respect for each other.”

Many participants who were at the International Monetary Fund and World Bank Spring Meetings have also highlighted that the Trump administration was still conflicted in its demands from trading partners hit with sweeping tariffs.

If both countries are far from reaching an agreement, gold’s fall may be brief as investors will most likely return to safety when things escalate again.

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