Gold Prices Rebound Amid US-China Trade Truce and Federal Reserve Dissent

Gold prices experienced a jump, recovering after a series of declines, as traders processed the announcements following the highly anticipated summit between US President Donald Trump and Chinese leader Xi Jinping. The outcome was a trade arrangement that, while offering a temporary truce, is not anticipated to be a sweeping resolution to the fundamental economic competition between the two largest global economies.

The precious metal climbed by as much as 1.3%, approaching $3,982 per ounce. This followed a sharp retreat where prices had fallen nearly 5% over the previous four trading days. President Trump described the exchange with Xi as "amazing," announcing that fentanyl tariffs would be immediately halved to more than 10%. Furthermore, the deal included China resuming soybean purchases and suspending rare-earth licensing for one year. Contrary to some speculation, the President clarified that granting the US access to Nvidia Corp.’s most advanced Blackwell line had not been a topic of discussion.

Analysts, including Charu Chanana, a strategist at Saxo Capital Markets Pte, suggest this move represents an initial effort to stabilize the US-China relationship by selectively re-engaging trade channels to rebuild confidence. Nevertheless, gold continues to react to underlying anxieties, pricing in geopolitical risks and the likelihood of a soft easing bias from the Federal Reserve.

The market is also grappling with conflicting statements from Federal Reserve officials. The central bank delivered a quarter-point reduction in interest rates on Wednesday, a move largely expected by the market. However, Chair Jerome Powell subsequently expressed uncertainty regarding the probability of a further rate cut in December. The division within the Fed was underscored by the vote, which featured dissents for the third consecutive meeting, a pattern not observed since 2019. This internal disagreement adds complexity for investors seeking indicators on the future of monetary policy, a challenge compounded by the absence of official economic data due to the US government shutdown that commenced earlier in October. As a non-yielding asset, gold typically faces resistance when interest rates are high.

The precious metal has pulled back significantly following a major surge that had propelled prices to a record high of above $4,380 per ounce the previous week. Technical analysis had suggested that the rally was overheated, and improving prospects for a US-China trade resolution have reduced demand for gold as a safe haven. Despite the recent correction, gold maintains a strong gain of approximately 50% this year, bolstered by consistent purchasing from central banks and investor interest in hedging against mounting budget deficits. Sebastian Mullins, head of multi-asset and fixed income at Schroders, noted that the depth of potential monetary demand makes the current gold bull market "incomparable with prior bull markets." The recent price climb attracted both institutional and retail buyers to gold-backed exchange-traded funds (ETFs), though outflows this week have lessened this support, with total ETF holdings decreasing for five days in a row through Tuesday, marking the longest streak of declines since May.

As of 1:30 p.m. in Singapore, the spot price of gold was up 0.5% to $3,949.50 per ounce. Concurrently, the Bloomberg Dollar Spot Index registered a marginal dip of 0.1%. Investors are now awaiting the World Gold Council’s quarterly demand report, expected later on Thursday, for further insight into investor and central bank demand. Silver and platinum showed minor changes, while palladium recorded an increase.