Gold prices edged lower on Wednesday, May 14, as easing tensions between the United States and China diminished the metal’s appeal as a safe-haven asset. Spot gold fell by 0.7% to $3,226.11 per ounce, while U.S. gold futures declined 0.6% to $3,229.50.
The decline follows a significant development in trade relations: the U.S. announced a reduction in tariffs on low-value Chinese shipments, and China reciprocated by lowering its tariffs on U.S. goods to 10% for an initial 90-day period starting from 12:01 pm on Wednesday. These moves signal a temporary thaw in the ongoing trade dispute between the world’s two largest economies.
Analysts suggest that the easing of trade tensions has reduced the urgency for investors to seek refuge in gold. “The recent U.S. decision to reduce tariffs on low-value Chinese shipments and ongoing trade negotiations have contributed to market optimism, reducing gold’s appeal,” noted market observers.
Adding to the pressure on gold, U.S. inflation data released on Tuesday showed the consumer price index rose by 0.2% in April, below expectations of 0.3%. This softer inflation reading has led traders to anticipate potential interest rate cuts by the Federal Reserve later this year, with the market pricing in 53 basis points in rate reductions beginning in September.
While lower interest rates typically support gold by reducing the opportunity cost of holding non-yielding assets, the current market sentiment appears more influenced by the improved trade outlook. Investors are now awaiting Thursday’s Producer Price Index for further insight into Federal Reserve policy.
Other precious metals also experienced declines: silver fell 0.8% to $32.61 per ounce, platinum remained steady at $988.65, and palladium decreased by 0.9% to $948.60.
The recent movements in gold prices underscore the metal’s sensitivity to geopolitical developments and economic indicators. As the U.S. and China navigate their trade relationship, and with key inflation data on the horizon, market participants will be closely monitoring these factors to gauge the future trajectory of gold and other precious metals.
