Gold Edges Higher on Trump-Xi Talks and Inflation Signals

Key Moments

Gold Prices Edge Higher

Gold prices moved modestly higher on Thursday as market participants concentrated on discussions between US President Donald Trump and Chinese President Xi Jinping, seeking indications of progress toward resolving the Iran war.

Spot gold gained 0.4 per cent to $4,707.08 per ounce as of 0732 GMT. US gold futures for June delivery also advanced 0.4 per cent to $4,713.80.

A decline in benchmark 10-year US Treasury yields reduced the opportunity cost of holding non-yielding gold, offering some support to prices.

Market Commentary on Gold

“Gold seems to be consolidating at the moment as everybody is looking at what’s going to happen in the high-level talks between the US and China,” said GoldSilver Central Managing Director Brian Lan.

“(Gold) is a bit downward-biased and I think that is also a window for investors who are looking to come into the metal,” Lan added.

Trump-Xi Summit and Geopolitical Backdrop

At the opening of a two-day summit on Thursday, China’s Xi Jinping told Trump that trade discussions were advancing, but cautioned that differences over Taiwan could steer bilateral ties onto a dangerous course and potentially lead to conflict.

Trump is expected to ask China to help resolve the costly and unpopular conflict that he initiated with Israel in late February, although analysts believe he is unlikely to secure the level of support he is seeking.

US Inflation Data and Federal Reserve Outlook

Data released on Wednesday showed US producer prices recorded their largest increase in four years in April, driven by sharply higher costs for goods and services, adding to evidence of rising inflation pressures.

The US Senate approved Kevin Warsh as chair of the Federal Reserve as the central bank confronts intensifying inflation that could complicate efforts to deliver the interest-rate cuts that Trump has demanded.

Traders have largely removed expectations for a Fed rate reduction this year, with markets now assigning a 28 per cent chance of an interest-rate increase by December, according to CME Group’s FedWatch tool.

While gold is typically viewed as a hedge against inflation, higher interest rates generally weigh on the metal because it does not offer a yield.

Indian Market Discounts and Physical Demand

In India, gold discounts widened to a record level of more than $200 per ounce on Wednesday. Bullion dealers told Reuters that a jump in prices following an import duty increase prompted investors to sell into an already weak demand environment.

Performance of Other Precious Metals

Other precious metals were mixed, with silver, platinum, and palladium all trading lower.