Gold prices retreated during the Asian session on Tuesday, weighed down by a strengthening United States dollar and a perceived softening in U.S.-China trade tensions.
By 3:25 pm AEST (5:25 am GMT), spot gold had declined $36.68, or 1.1%, to trade at US$3,307.42 per ounce.
The dip followed comments by U.S. Treasury Secretary Scott Bessent, who said on Monday that while the U.S. remains in contact with Beijing, “it’s up to China to de-escalate", given the ongoing trade imbalance between the two countries.
With tensions between the world’s two largest economies showing signs of cooling, investor demand for traditional safe-haven assets such as gold has diminished.
"Sentiment wasn’t helped by data showing declining demand in China," ANZ analysts noted. "Consumption in Q1 fell 5.96% y/y according to data from the China Gold Association. High prices were blamed for the weakness. Nevertheless, gold is likely to continue to benefit from its role as a strategic asset amid the fragmented geopolitical backdrop."
Meanwhile, market expectations of a shift in U.S. monetary policy could lend future support to gold.
While policymakers are widely expected to leave rates unchanged at the Federal Open Market Committee (FOMC) gathering on May 7, the CME FedWatch Tool is now pricing in a 54.4% probability of a 25 basis point interest rate cut at the Federal Reserve’s June meeting.
In the meantime, traders are closely watching upcoming macroeconomic releases, including the preliminary US Q1 gross domestic product (GDP) report and April’s nonfarm payrolls. Markets anticipate 135,000 new jobs added and the unemployment rate holding steady at 4.2%.
