Market reaction to US-China trade agreement

The announcement of a trade agreement between the United States and China triggered a swift reaction across global financial markets, with gold (XAU/USD) experiencing a sharp decline of 2.65% on Monday. Investors interpreted the deal as a sign of easing geopolitical tensions and a potential boost to global economic stability, reducing the immediate appeal of safe-haven assets like gold.

Equity markets responded positively, with major indices in the US and Asia posting gains as optimism returned to risk assets. The Australian dollar also saw modest strength, reflecting improved sentiment towards global trade and commodity demand. In contrast, gold prices came under pressure as traders rotated out of defensive positions and into riskier investments.

Market participants had been closely watching the developments between the two economic superpowers, as prolonged trade tensions had previously supported gold prices by fuelling uncertainty and dampening growth expectations. The agreement, which includes commitments on tariffs, intellectual property, and agricultural purchases, was seen as a step towards resolving a long-standing dispute that had weighed on global trade flows.

Despite the initial sell-off in gold, some analysts in Australia noted that the market reaction may have been somewhat overdone, given that the agreement lacks detailed enforcement mechanisms and leaves several contentious issues unresolved. As a result, while the immediate risk-off sentiment faded, underlying concerns about the durability of the deal and its long-term impact on global growth remain in focus.

Gold price recovery and current levels

Following Monday’s sharp decline, gold (XAU/USD) has staged a notable recovery, rebounding to trade near the $3,260 level as of Tuesday. This recovery reflects a partial reversal of the previous session’s losses, as investors reassess the broader implications of the US-China trade agreement and its potential limitations. The rebound suggests that while the initial optimism surrounding the deal prompted a sell-off in safe-haven assets, market participants are not entirely convinced that geopolitical risks have been fully neutralised.

In the Australian market, gold’s recovery has been closely watched by both retail and institutional investors, particularly given the metal’s strong performance over the past year amid global economic uncertainty. The Australian dollar’s modest appreciation has had a limited dampening effect on local gold prices, with demand for physical bullion and gold-backed ETFs remaining resilient. Perth Mint reported steady interest from domestic buyers, indicating that Australian investors continue to view gold as a strategic hedge despite short-term volatility.

Technical indicators also point to a stabilisation in gold prices, with support levels holding above $3,200 and momentum indicators suggesting a potential for further upside if risk sentiment deteriorates again. Analysts note that the rebound has been supported by a combination of short-covering and renewed buying interest, particularly from traders who view the recent dip as a buying opportunity in a longer-term bullish trend.

Additionally, concerns over inflationary pressures and central bank policy remain relevant, providing a supportive backdrop for gold. In Australia, the Reserve Bank’s cautious stance on interest rates continues to underpin demand for non-yielding assets like gold, especially as global central banks signal a more dovish outlook in response to mixed economic data.

The recovery in gold prices underscores the metal’s enduring appeal as a portfolio diversifier and store of value, particularly in an environment where geopolitical developments and economic data continue to drive market volatility.

Outlook for XAU/USD in the near term

Looking ahead, the near-term outlook for XAU/USD remains cautiously optimistic, with several factors likely to influence price direction. While the recent rebound to around $3,260 suggests a degree of resilience, gold remains sensitive to shifts in global risk sentiment, central bank policy signals, and macroeconomic data releases. In particular, any signs of renewed tensions between the US and China or setbacks in implementing the trade agreement could reignite safe-haven demand, potentially pushing gold prices higher.

From a technical perspective, analysts are watching key resistance levels near $3,280 and $3,300, which could act as short-term barriers to further gains. A sustained break above these levels may open the door to a retest of recent highs, particularly if market volatility increases. On the downside, support is seen around $3,200, with a break below this level potentially triggering a deeper correction. Traders in Australia are advised to monitor these levels closely, especially given the influence of global developments on local gold pricing.

Economic indicators from major economies, including US inflation data and employment figures, will be closely scrutinised in the coming weeks, as they may shape expectations around interest rate trajectories and monetary policy adjustments. In Australia, the Reserve Bank’s upcoming policy meetings and commentary on domestic inflation trends will also be key for local investors assessing the outlook for gold.

Additionally, seasonal factors and physical demand trends, particularly from Asia, could provide further support to gold prices. With the Lunar New Year approaching, increased jewellery demand from China and India may offer a temporary boost to physical gold markets, which could in turn influence spot prices. Australian gold producers and exporters may benefit from this seasonal uptick, especially if the Australian dollar remains relatively stable.

While short-term volatility is likely to persist, the broader environment of geopolitical uncertainty, cautious central bank policy, and persistent inflation concerns continues to underpin a constructive outlook for gold. For Australian investors, gold remains a relevant asset class for diversification, particularly amid ongoing global economic crosscurrents.

Gold rebounds after sharp decline

Gold (XAU/USD) is showing signs of recovery, trading close to $3,260 as of Tuesday, after a sharp 2.65% drop in the previous session. The rebound reflects renewed investor interest following Monday’s sell-off, which was triggered by the announcement of a trade agreement between the United States and China.

Despite the recent volatility, gold remains a key safe-haven asset, particularly for Australian investors navigating global economic uncertainty. The bounce back suggests that market participants are reassessing the longer-term implications of the trade deal and its potential impact on inflation, interest rates, and currency movements.

“The quick recovery in gold prices highlights the underlying demand for hedging against macroeconomic risks,” said a Sydney-based commodities analyst. “Even with positive geopolitical developments, gold continues to attract capital as a strategic asset.”

• Gold is currently trading near $3,260 after falling 2.65% on Monday.
• Monday’s decline was the steepest single-day drop in over a month.
• Investor sentiment appears to be stabilising, with buying interest returning in early Tuesday trading.

For Australian investors, the rebound in gold offers a potential entry point, especially amid a weakening AUD and persistent inflation concerns. The local gold price remains supported by currency dynamics and strong physical demand in the Asia-Pacific region.

Impact of US-China trade agreement on gold prices

The announcement of the US-China trade agreement initially triggered a sharp sell-off in gold, as markets interpreted the deal as a sign of easing geopolitical tensions and improving global trade conditions. This reduced the immediate demand for safe-haven assets like gold, leading to Monday’s 2.65% drop. However, analysts caution that the agreement may not resolve deeper structural issues between the two economic giants, and that uncertainty could persist in the medium term.

For Australian investors, the trade deal’s impact on gold is multifaceted. On one hand, improved trade flows could support global growth and risk appetite, potentially weighing on gold. On the other, any signs of fragility in the agreement or delays in implementation could reignite demand for gold as a hedge. Additionally, the Australian dollar’s sensitivity to Chinese economic performance means that any volatility in China’s outlook could influence local gold prices through currency effects.

“While the trade agreement has calmed markets for now, it’s not a silver bullet,” noted a Melbourne-based gold strategist. “Investors are still wary of inflationary pressures and central bank policy shifts, which continue to support gold in diversified portfolios.”

• The US-China trade deal initially pressured gold prices lower due to reduced geopolitical risk.
• Market participants remain cautious about the long-term durability of the agreement.
• Australian gold prices are influenced by both global sentiment and AUD/USD movements.

As the dust settles, gold’s role as a strategic asset remains intact. The trade agreement may offer short-term relief, but underlying macroeconomic risks—such as inflation, central bank tightening, and currency volatility—continue to underpin demand for gold among Australian investors seeking portfolio resilience.