Gold prices near $4,000 'stall'… wait-and-see on US-China trade truce

International gold prices, which have risen by at least 50% so far this year, have been declining since the 20th of last month, and the adjustment phase continues. Despite the US-China summit, traders are taking a wait-and-see stance amid assessments that the bilateral trade conflict has not been fully resolved.

According to Reuters, gold spot prices traded at 3997.79 dollars per ounce at around 4:22 p.m. Eastern Time on the 31st, down 0.7% from the previous session.

Earlier, December-delivery gold futures on COMEX, the metal futures exchange under the CME Group, fell 5.7% from the previous session, marking the largest drop in 12 years.

Much of the recent downward pressure on gold appears to stem from Federal Reserve (Fed) Chair Jerome Powell's caution regarding interest rate cuts. Powell took a hawkish stance the day before, saying that December rate cut speculation is "not a done deal."

When benchmark interest rates fall, gold can become relatively more attractive than the dollar and prices can rise. By dampening market expectations for further Fed rate cuts, the Fed has increased downward pressure on gold prices.

On the other hand, lingering uncertainty that has not been fully dispelled despite the US-China summit is a factor supporting gold prices.

At the summit held in Busan on the 30th of last month, the US and China achieved some results, including a 10 percentage-point reduction in US tariffs on China and a one-year postponement of China's rare earths export controls, but market concerns remain.

Chinese President Xi Jinping emphasized a "multilateral trade system" at the APEC summit the day after the meeting with the US, which was interpreted as targeting the United States.

There are also concerns that uncertainty in US-China relations has grown. Bloomberg said, "This US-China summit bought both countries time to reduce their strategic interdependence," adding, "While extreme scenarios may be avoided for a few months, bilateral relations are likely to be stable only during that period."

However, experts expect the adjustment phase in gold prices to continue for the time being.

Robert Rennie, a Westpac Bank analyst, said, "Hawkish rate-cut expectations, a US-China trade truce, and large outflows from gold exchange-traded funds (ETFs) are reinforcing the adjustment sentiment," and warned, "Gold prices could fall to 3750 dollars per ounce."

Yonghyun Shin, Hankyung.com reporter yonghyun@hankyung.com