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US China tariff truce boosts US dollar gold safe haven demand, drops sharply by 3%
forex9 months before
Summary：After reaching an agreement between China and the United States to reduce tariffs and suspend a new round of tariffs for 90 days, risk aversion has significantly declined, and international gold prices fell more than 3% on Monday, hitting a new low in over a week. The strengthening of the US dollar further weakens the attractiveness of gold. Analysts point out that gold prices may continue to fluctuate in the short term, and market attention is turning to the upcoming release of US CPI data to assess the outlook for Federal Reserve policy.
On May 12th (Monday), after China and the United States reached an agreement to reduce tariffs and suspend further levies, the market's demand for safe haven has significantly fallen, and international gold prices have plummeted. As of press time, spot gold has fallen 2.61% to $3238.83 per ounce, hitting $3207.71 at one point during trading, the lowest level since May 1st.
According to Giovanni Staunovo, a commodity analyst at UBS Group, with the easing of trade tensions between China and the United States, the attractiveness of safe haven assets such as gold is diminishing. He expects that gold prices will continue to fluctuate in the short term, but high tariffs will drag down global economic growth and may prompt some central banks to restart loose policies within the year. Meanwhile, the current correction in gold prices may also attract central banks to allocate gold reserves at low levels.
China and the United States suspend tariffs for 90 days, easing risk aversion
After key talks with China in Geneva, US Treasury Secretary Scott Bessent announced that the two sides have reached an agreement on reducing tariffs. According to the agreement, the bilateral tariff rates will be reduced by 115% overall, and subsequent additional measures will be suspended for 90 days. This progress marks a substantial easing of the previously tense trade situation.
Previously, the mutual imposition of tariffs by both sides triggered market volatility, boosting concerns about the global economic outlook and temporarily supporting the rise in gold prices.
The strengthening of the US dollar puts pressure on gold prices
Against the backdrop of rising market risk appetite, the US dollar index rose more than 1% on the same day, strengthening across a basket of major currencies. The strong US dollar has increased the cost for non US dollar currency investors to hold gold, further suppressing the price of gold.
Jigar Trivedi, senior commodity analyst at Reliance Securities, pointed out that "the strengthening of the US dollar puts pressure on gold prices, while the easing geopolitical situation weakens gold's safe haven function. In the short term, gold prices may test the support level of $3200 per ounce
Market Focus on US CPI, Federal Reserve Policy Direction Becomes Focus of Attention
Investors are currently closely monitoring the upcoming release of the US Consumer Price Index (CPI) data for April on Tuesday. This data may provide an important basis for the market to judge the next monetary policy path of the Federal Reserve.
The current market generally expects the Federal Reserve to maintain a wait-and-see attitude in the coming months, waiting for more economic data guidance. However, if inflation data exceeds expectations, it may raise concerns about the continuation of tightening policies, thereby once again affecting the performance of the precious metal market.
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