Gold prices dip on easing trade tensions, focus shifts to inflation data

WASHINGTON: Gold prices fell on Wednesday as de-escalation in US-China trade tensions weakened safe-haven demand, while markets eyed another set of inflation data to assess the Federal Reserve’s policy path.

Spot gold fell 0.4 per cent to $3,234.32 an ounce as of 0231 GMT. US gold futures eased 0.3 per cent to $3,237.00.

“Positive developments in US trade policy (are) diminishing the appeal of gold in the short-term,” Capital.com’s financial market analyst Kyle Rodda said.

“I think that if we see continued progress in trade negotiations and deals being done between the US and its trading partners, gold can pull back further. $3,200 is a pretty critical level of support.”

The US will cut the “de minimis” tariff for low-value shipments from China to 30 per cent, per a White House executive order and industry experts, further de-escalating a potentially damaging trade war between the world’s two largest economies.

On Monday, US President Donald Trump said he does not see tariffs on Chinese imports returning to 145 per cent after the 90-day pause, adding that he believes Washington and Beijing will have a deal.

Meanwhile, the United States Department of Labour said the consumer price index increased 0.2 per cent in April, while economists polled by Reuters expected a 0.3 per cent rise following the 0.1 per cent decline in March.

Traders await the Producer Price Index data, due on Thursday, for cues about the Fed’s interest rate trajectory. The market is expecting 53 basis points of rate cuts this year, starting September.

Gold, traditionally viewed as a hedge against inflation, also tends to thrive in a low-interest rate environment.

On Tuesday, Trump reiterated his call for the Fed to lower rates, saying prices for gas, groceries and “practically everything else” are down.

Spot silver eased 0.8 per cent to $32.63 an ounce, platinum was steady at $987.85 and palladium lost 0.7 per cent to $950.18.

Read next: Microsoft to cut 6,000 jobs as AI spending takes priority