Gold prices retreated on Wednesday as optimism surrounding potential U.S.-China trade talks diminished demand for safe-haven assets, while investors prepared for the Federal Reserve‘s policy meeting later in the day.
In Dubai, gold rates experienced an uptick. The price of 24-carat gold increased by AED2.25, reaching AED409.00. Similarly, 22-carat gold rose by AED2.00, bringing its value to AED378.50. Additionally, 21-carat gold saw a gain of AED2.00, now priced at AED363.00, while 18-carat gold climbed by AED1.75 to AED311.25.
Spot gold declined by 1.2 percent to $3,388.67 an ounce as of 02:25 GMT (currently trading at $3,384.86), after surging nearly 3 percent in the previous session. U.S. gold futures also experienced a decrease, falling 0.7 percent to $3,397.70 (currently trading at $3,385.32).
Vijay Valecha, chief investment officer, Century Financial, stated to Economy Middle East, “From a technical perspective, on a daily timeframe, gold prices have declined by 1.22 percent to $3,390. The metal could face resistance at $3,435, and an immediate support at $3,370. Further, the 9-day SMA [Simple Moving Average] support is also observed at $3,322, followed by the 21-day SMA support at $3,282. The daily RSI is trending downward, suggesting a loss of momentum following three consecutive sessions of upward movement.”
“I think gold seems to be pulling back amid a broad-based ‘risk on’ move across markets … this is a pro-cyclical configuration that might echo optimism amid clues that the U.S. and China have started real trade negotiations,” reported Reuters, citing Ilya Spivak, head of global macro at Tastylive.
U.S. officials engage in trade talks
U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer will meet with top Chinese economic official He Lifeng in Switzerland this weekend for discussions. Both nations imposed tit-for-tat tariffs on each other last month, igniting a trade war that has raised concerns about a global recession.
Asian traders began their day on Wednesday with a positive response to this overnight news, leading to a reduction in the safe-haven flows and diminishing demand for gold prices as a traditional store of value. The U.S. dollar strengthened as U.S.-China trade optimism alleviated worries regarding economic growth.
Market focus on Fed meeting
On Tuesday, U.S. President Donald Trump announced that he and senior administration officials will review potential trade deals over the next two weeks to determine which ones to pursue. The market’s attention is now directed toward the Federal Open Market Committee (FOMC) meeting later in the day, where the U.S. central bank is expected to maintain steady interest rates.
“This meeting marks the first occurrence since the Trump administration implemented extensive tariffs on China, increasing expectations for a potential agreement between these two major economies,” Valecha hihglighted.
The FOMC is anticipated to remain vague to preserve flexibility as it navigates the implications of the ongoing trade war for growth and inflation, Spivak mentioned. Traders currently expect 80 basis points of rate cuts this year, beginning in July.
Comments from Fed Chair Jerome Powell are highly anticipated for insights into the timing of potential future rate reductions. Powell is likely to adhere to the Fed’s cautious stance, hinting at a wait-and-see approach due to uncertainty surrounding the effects of U.S. tariffs. Should he acknowledge resilience in the economy, it could signal a hawkish shift in the Fed’s policy, potentially countering June rate cut expectations and resulting in a stronger U.S. Dollar. Consequently, gold prices could extend their correction from two-week highs.
Read more: Dubai 24-carat gold prices up AED8; global rates surpass $3,360 amid safe-haven demand
Economic data impacting gold prices
Following the release of robust U.S. labor market data and business PMIs, market participants have adjusted their expectations for a June rate cut, with Goldman Sachs and Barclays moving their predictions to July from June.
Gold, which is traditionally regarded as a hedge against economic and political uncertainties, tends to perform well in a low-interest rate environment. Spot silver decreased by 0.9 percent to $32.93 an ounce, while platinum fell by 0.6 percent to $979.07, and palladium lost 0.4 percent to $970.28.
