Gold prices briefly dropped below $3,300 per troy ounce after US President Donald Trump made significant reversals on both his stance on tariffs against China and his comments about dismissing Federal Reserve Chair Jerome Powell, according to Commerzbank FX analyst Thu Lan Nguyen.
Gold Remains a Safe-Haven Amid Trade Uncertainty
Despite the temporary dip, gold is likely to retain its status as a safe-haven asset, given the continued uncertainty surrounding US-China trade talks. With differing statements from Trump, US Treasury Secretary Scott Bessent, and Beijing on the prospects of an agreement, the outlook remains unclear, supporting gold’s demand as a hedge against market volatility.
Interest Rate Cut Expectations Boost Gold
Additionally, recent comments from Federal Reserve officials have bolstered expectations of potential interest rate cuts, further supporting gold. Fed Governor Christopher Waller noted that the central bank may need to implement more significant and rapid cuts if labor market conditions deteriorate due to the impact of tariffs. Cleveland Fed President Beth Hammack also suggested that the Fed could initiate a rate cut as early as June, depending on forthcoming economic data.
While market-based US interest rate expectations did not shift dramatically following these remarks, many market participants are increasingly confident that the Fed will act in the summer. This sentiment has likely provided additional support for gold prices, as lower interest rates tend to increase the appeal of non-yielding assets like the precious metal.
Focus Shifts to US Economic Data
Looking ahead, market attention will turn to upcoming US economic data. If the data begins to show clear signs of a slowdown exacerbated by tariff policies, gold could see renewed upward momentum. The uncertainty surrounding both trade relations and the Fed’s policy decisions will likely keep gold in demand as a safe haven in the near term.
