Gold prices fell on Friday in European trade on track for the third loss in a row, and under pressure from the stronger dollar against a basket of major rivals, while haven demand slows down following a US-UK trade deal.
Now markets are focusing on the US-China trade talks expected this weekend in Switzerland and could potentially lead to de-escalation in the trade war.
The Price
Gold prices fell 0.95% today to $3274 an ounce, with a session-high at $3323.
On Thursday, gold lost 1.75%, the second loss in a row on profit-taking away from a two-week high at $3435.
US Dollar
The dollar index rose 0.2% on Friday, expanding gains for the third straight session and scaling a four-week high at 100.86 against a basket of major rivals.
A stronger dollar makes the greenback-denominated gold futures less attractive to holders of other currencies.
The dollar’s gains come as concerns about a US recession diminished following positive developments in trade negotiations.
Trade Developments
The US and the UK announced a new trade agreement, the first of its kind with the new US administration.
According to the deal, the 10% base reciprocal tariffs on UK goods will continue, but 25% tariffs on British cars will be reduced to 10%, while 25% tariffs on UK steel and aluminum will be scrapped.
The UK will reduce tariffs on a range of US goods from 51% to 1.8%, while raising beef and ethanol imports from the US by $5 billion a year.
Following the announcement of the deal with the UK, Trump said he expects negotiations with China by the end of this week, which could lead to a reduction in the 145% China tariffs.
US Treasury Secretary Scott Bessent is scheduled to meet Chinese trade officials on Sunday in Switzerland to conduct negotiations.
The US administration might reduce tariffs on Chinese imports by over a half according to the New York Post’s sources.
The Fed
In a step that wasn’t surprising, the Fed decided to maintain interest rates unchanged at below 4.5%, due to ongoing economic uncertainty.
The statements asserted the FOMC continues to monitor risks closely, and believes that unemployment and higher inflation risks are on the upside.
The statement hinted that tariffs threaten higher prices and could slow growth, which opens the door to the scenario of inflationary recession.
Trump described Powell as a “fool” and insisted that energy and oil prices alongside most other products have fallen with inflation barely there, and once again demanded a rate cut.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in June fell from 32% to 20%.
The odds of such a cut in July fell as well from 71% to 66%.
Now investors await important remarks by Fed officials on inflation and the future of interest rates.
The SPDR
Gold holdings at the SPDR Gold Trust rose 2.01 tons yesterday to a total of 939.68 tons, away from April 9 lows at 937.67 tons.
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