Market conditions for gold are volatile. The price increased, recovering some losses, due to renewed uncertainty surrounding US-China trade negotiations. However, Federal Reserve policy, particularly its cautious approach to interest rate changes and its stance on tariffs, is applying downward pressure on the non-yielding asset.
- Gold rose to around $3,390 per ounce.
- Uncertainty surrounding US-China trade talks boosted gold’s safe-haven appeal.
- President Trump indicated he would not reduce tariffs on China.
- The Federal Reserve held its benchmark interest rate steady.
- The Federal Reserve warned of rising risks of both inflation and unemployment.
- Fed Chair Powell noted that the central bank is not considering a preemptive rate cut.
The interplay between trade tensions and monetary policy creates a mixed outlook for gold. Heightened trade uncertainty tends to drive investors towards safe-haven assets like gold, pushing prices upward. However, a cautious Federal Reserve, signaling a possible reluctance to cut rates despite economic pressures from tariffs, could limit gold’s upside potential, as higher interest rates typically make non-yielding assets less attractive.