Gold Slips as Easing US-China Tensions and Trump’s Fed Comments Boost Risk Appetite

Gold prices saw a significant drop of over 2.5% on Wednesday, with XAU/USD falling to $3,288 after reaching a high of $3,386. This plunge was driven by improved investor risk appetite due to a perceived easing of US-China tensions and a statement from President Donald Trump affirming he does not intend to fire Federal Reserve Chair Jerome Powell. These developments boosted investor confidence and led to a shift away from safe-haven assets like gold.

Tariff Speculation and Trump’s Powell Support Steady Markets, Pressuring Gold Prices

Despite some signs of optimism, the market narrative continues to be dominated by tariffs. A Wall Street Journal article suggested the US might lower tariffs on Chinese imports, which lifted US equities and contributed to gold’s decline. However, Treasury Secretary Scott Bessent countered these hopes, stating that there has been no offer to reduce tariffs unilaterally, indicating that any reduction would depend on reciprocal actions from China.

President Trump’s public support for Fed Chair Powell added to market stability. He stated there was no plan to dismiss Powell, although he would prefer more aggressive rate cuts from the central bank. These remarks helped support the US Dollar, as reflected by the modest 0.09% rise in the US Dollar Index to 99.72. This recovery in the Greenback further pressured gold prices downward.

Fed Holds Steady as Mixed Economic Data Fuels Speculation on Future Cuts

Market expectations suggest the Federal Reserve is likely to hold interest rates steady in the upcoming meeting, with a 94% probability of no change. However, projections still point to a potential 92 basis points of easing by year-end. Meanwhile, US economic data showed mixed results, with April’s Manufacturing PMI rising to 50.7, while the Services PMI dipped significantly below forecasts to 51.4. These indicators are being closely watched by investors for clues on the Fed’s future policy path.

Despite the price drop, gold’s overall trend remains bullish. For bears to gain further momentum, prices would need to fall below the April 3 peak of $3,167, targeting the 50-day SMA at $3,032. Conversely, if bulls reclaim the $3,300 level, they could push prices toward resistance at $3,400 and $3,450. The market remains sensitive to economic data and geopolitical developments, keeping gold in a volatile trading range.