Investors are also weighing the prospects for a US-China trade deal to relieve some of the geopolitical tensions that have bolstered demand for haven assets like gold. The metal has dropped nearly 6% in the last two sessions.
“After an overstretched rally, gold is behaving like an elastic band that’s been pulled too far and is now snapping back hard,” said Hebe Chen, an analyst at brokerage Vantage Global Prime Pty Ltd. “Prices holding firm above the $4,000 mark point to a technical reset rather than a fundamental shift, with safe-haven demand and the ‘debasement trade’ still very much intact.”
The so-called debasement trade, in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits, has been a driver of gold’s growth since mid-August. The metal is still up about 55% this year, with prices also supported in recent weeks by bets the Federal Reserve will make at least one quarter-point cut by the end of the year.
Traders are using options to protect against the potential for further gyrations: one-month implied volatility remains elevated, after surging to its highest since 2022 earlier this week.
Investors are watching potential progress in talks between the US and China after a recent resurgence in tensions between the world’s two largest economies. US President Donald Trump on Tuesday predicted an upcoming meeting with Chinese President Xi Jinping would yield a “good deal” on trade – while also conceding that the talks may not happen.
“Markets are taking a balanced stance toward the trade and geopolitical noise — cautious, yet grounded in a realistic sense of optimism,” said Chen.
Gold edged lower to $4,083 an ounce at 10:35 a.m. Singapore time. The Bloomberg Dollar Spot Index edged higher. Silver extended a decline after dropping 7.6% in the past two sessions. Palladium and platinum dropped.
Read Also: Titan on the cusp of a major rebound; UBS raises target by 31%
