Gold Recovers Losses After Falling Below $4,000 an Ounce

SadaNews - Gold recovered some of its losses after falling below $4,000 an ounce on Monday, as progress in trade talks between the United States and China affected demand for safe-haven assets.

The precious metal rose by 0.9% on Tuesday, after having declined by 3.2% in the previous session, following the announcement by negotiators from Washington and Beijing that they reached a series of agreements covering tariffs and export controls.

U.S. Treasury bonds declined even as traders maintained bets that the Federal Reserve would move towards easing monetary policy this week, as rising yields pressured demand for gold, which does not generate interest.

Gold Bounces Back After Dropping from Historical Peak

Gold sharply declined from a record high exceeding $4,380 an ounce last Monday, following a strong upward surge, but it is still up more than 50% since the beginning of the year.

This performance has been supported by purchases from central banks and what is known as "currency devaluation trading," as investors avoid sovereign debt and currencies to hedge against rising fiscal deficits, which has also attracted individual investors.

Chris Weston, head of research at Pepperstone Group, wrote in a note that "while gold continues to hit low levels and futures trading volumes remain high on down days, identifying the bottom is a challenging task."

He added: "At this moment, it makes more sense to let others do the hard work and buy tactical rallies after declines."

Kyoto Conference and Signs of Weak Central Demand

The rapid rise of gold and its recent downturn was a major topic of discussion at the Precious Metals Conference organized by the London Bullion Market Association in Kyoto, the largest annual gathering of the gold industry.

John Reid, market strategist at the World Gold Council, said on Monday during the event that demand from central banks is no longer as strong as before, adding that a deeper correction in prices may be welcomed by professional traders.

Expectations of Further Decline and Monitoring the Federal Meeting

Analysts at Citigroup, including Max Layton, wrote in a note on Monday that the U.S. shift towards deals with China, alongside changing price momentum for gold and the potential end of the U.S. government shutdown, may push the metal to further declines in the coming days and weeks, predicting that gold could fall to $3,800 an ounce over the next three months.

Spot gold rose by 0.8% to $4,015.35 an ounce by 9:27 AM in Singapore, while the Bloomberg dollar index fell by 0.1%. Silver rose after a 3.7% loss on Monday, while platinum declined and palladium rose.

Anticipating Interest Rate Decision and Choosing Jerome Powell's Successor

It is widely expected that policymakers at the Federal Reserve will reduce interest rates by 25 basis points at their two-day meeting concluding on Wednesday, marking the second consecutive cut, as falling borrowing costs typically support precious metals that do not generate interest.

Meanwhile, markets are following the list of five candidates to succeed Federal Reserve Chair Jerome Powell, who is expected to leave his position in May.

Treasury Secretary Scott Piesen confirmed on Monday that the list of candidates has narrowed to include: Christopher Waller and Michelle Bowman, current members of the Federal Reserve Board, former board member Kevin Warsh, Kevin Hassett, director of the National Economic Council at the White House, and Rick Rider, CEO of BlackRock.