Gold prices fell more than 1% on Wednesday as optimism surrounding US-China trade talks weighed on the safe-haven metal ahead of the Federal Reserve’s interest rate decision later in the day.
As of 08:16 GMT, spot gold was down 1.2%, trading at $3,386.23 per ounce, following a significant rally in the previous session. Meanwhile, US gold futures declined 0.8%, settling at $3,394.90.
Zain Vawda, an analyst at MarketPulse by OANDA, noted, “Reports emerged late yesterday suggesting that US and Chinese officials could meet this week, and if confirmed by authorities, this could boost market sentiment.”
US Treasury Secretary Scott Bessenet and Chief Trade Negotiator Jamison Greer are scheduled to meet Chinese President He Lifeng in Switzerland this weekend to discuss tariffs.
The ongoing trade war between the US and China, which led both nations to impose tariffs on each other last month, has sparked global recession concerns, prompting investors to seek refuge in assets like gold.
The market’s focus is now shifting to the Federal Reserve’s policy statement, due at 18:00 GMT. The market widely expects the Fed to hold rates steady, but investors will be closely watching for any signals regarding future rate cuts.
According to the CME FedWatch Tool, the market currently sees only a 30% probability of a rate cut in June.
Gold is traditionally seen as a hedge against economic and political uncertainty and tends to thrive in low-interest-rate environments.
In terms of geopolitical risks, India carried out airstrikes on Pakistan and the Pakistan-administered region of Kashmir on Wednesday. Pakistan claimed to have shot down five Indian fighter jets, marking the most severe clashes between the nuclear-armed neighbors in over two decades.
Vawda added, “If tensions between India and Pakistan escalate into a more severe conflict, gold could attract more safe-haven demand, which may further support gold prices.”
In other precious metals, silver dropped 0.8% to $32.96 per ounce, platinum fell 0.2% to $983.06, and palladium remained stable at $974.43.
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