Gold's safe-haven appeal declines as the Fed's decision approaches

US-EU tariff agreement eases market tensions

On July 28, US President Trump and the European Commission reached an agreement on a 15% tariff, significantly lower than the previously threatened rate, successfully averting the risk of a new round of trade war. This followed a similar agreement between the US and Japan, signaling a stabilization of trade policy ahead of the Federal Reserve's interest rate meeting. This positive news boosted the US dollar, reviving market risk sentiment and suppressing gold, a traditional safe-haven asset.

According to Marex analyst Edward Meir, the more trade announcements there are and the clearer the agreement becomes, the more likely it is that the dollar will strengthen, thereby dampening the appeal of gold prices. During trading on the 28th, spot gold fell to $3,301.29, its lowest point since July 9 [data source: Reuters].

China and the United States restart negotiations, but limited results are expected

Meanwhile, US and Chinese officials are expected to resume tariff negotiations in Stockholm, Sweden, on July 30th, with the goal of extending the current trade truce by 90 days. While the market remains cautiously optimistic about the negotiations, the US Trade Representative has stated that he does not expect a major breakthrough and that the focus of the negotiations will be on monitoring and compliance mechanisms. This suggests that the trade situation has stabilized for now, but remains fragile.

Despite the selling pressure on gold, analysts warned that the implementation of these agreements is still uncertain. If the negotiations break down or the geopolitical situation deteriorates again, gold prices may regain support.

As the Fed's decision approaches, the market is betting on maintaining stability

Investors' attention will soon turn to the Federal Reserve's two-day interest rate meeting. While the market generally expects the Fed to maintain interest rates in the 4.25%-4.50% range, some investors are still betting on a September rate cut. Gold typically performs better during periods of low interest rates or anticipated easing, but until a clear direction is reached, gold prices will remain under pressure in the short term.

Aside from gold, the precious metals market was generally weak. Silver fell to $38.04 per ounce, platinum fell to $1,386.03, while palladium bucked the trend and rose to $1,238.18 [Data source: Reuters Commodity Quotes].

Analysis of gold trend as market sentiment recovers

The current pullback in gold prices is primarily driven by the dual impact of a stronger US dollar and rising market risk appetite, rather than a fundamental shift in gold's fundamentals. While weakening safe-haven demand in the short term is weighing on gold prices, the continued uncertainty surrounding global trade negotiations and the Federal Reserve's unclear policy path pose significant uncertainties in the medium and long term.

Investors should focus on the shifting language at this week's Federal Reserve meeting, whether a rate cut will be signaled in September, and the subsequent progress of US-China trade negotiations. These factors will have a profound impact on gold's safe-haven function and asset allocation value. It is recommended to maintain a flexible strategy at this stage, avoid blindly chasing gains and selling losses, and be prepared for potential volatility.

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