Gold Pulls Back As Trump Softens China, Powell Stances

 

Gold Retreats; Trump Softens on China, Fed Chair Powell

(Bullion News Network) – Gold pulled back on Wednesday after setting a fresh all-time high above $3,500 per troy ounce Tuesday. The price action comes on the heels of suggestions that U.S. President Donald Trump may be softening his stances on two inflammatory topics that have wreaked havoc on Wall Street this month. The U.S. leader signaled that his administration is willing to bring its tariffs on China, which are some of the largest in history, “down substantially.” This was welcome news for stock traders who feared that the escalating trade war with China could lead to higher prices for consumers and diminished economic growth for the U.S. economy. President Trump also remarked that he will not attempt to fire Federal Reserve Chair Jerome Powell. Analysts say that such an attempt could result in a prolonged and uncertain legal battle, and Wall Street staggered earlier this week after Trump seemed to suggest that he would fire Powell in a Truth Social post.

The two announcements kickstarted a rally on Wall Street this morning. While the Dow closed up 400 points and the tech-heavy Nasdaq added 2.5% to its value,  late-day trading erased much of the ‘mega-rally’ that occurred after markets opened. Gold prices recovered marginally but remain down $90 per troy ounce on a combination of reduced short-term safe haven demand and profit-taking following yesterday’s all-time high. Gold’s spot price is still up on the month, but this latest development could undercut the precious metal’s momentum heading into the end of April. Notably, today’s drop drove the price of gold below the recently established support at $3,300/ozt. 

On a more macro level, the midweek price dip may help underscore how vital economic uncertainty has become in the gold market. President Trump’s public spat with Fed Chair Jerome Powell, paired with an increasingly uncertain economic outlook in the face of an escalating trade war between the United States and China, provoked fears of a recession and drove demand for safe haven assets, including gold. While Federal Reserve interest rate cut speculation played a key role in gold’s 2024 run, a cautious Fed continues to prevent interest rate forecasts from motivating gold price action similarly this year.

Analysts view an interest rate cut as highly unlikely heading into the Federal Reserve’s May 7th meeting. CME FedWatch projects a 3.9% probability that the FOMC will move to cut rates by 25 basis points, down from 7.8% yesterday, 14.7% last week, and 14.3% one month ago. Key to the Fed’s data set leading up to its May meeting will be next week’s Personal Consumption Expenditure (PCE) report for the month of March. This index is one of the Fed’s core measures of inflation, and Fed Chair Powell has suggested that the FOMC will monitor both the labor market and inflation rate before deciding when to ease monetary policy. Employment data for April is also due next week. 

Silver prices moved opposite to gold on Wednesday, gaining over $1 per troy ounce as gold dropped. Silver price action has been notably muted this month, with the precious metal dropping below $30/ozt on April 4th before slowly climbing back toward the $34 level. The lopsided price action drove the gold-silver ratio sharply lower, down six points to close at just under 98:1. This is the lowest GSR on record since gold began its most recent run on April 3rd. 

Moving forward, the Trump administration’s approach to both China and Jerome Powell is likely to remain in focus to round out the month. Wall Street breathed a sigh of relief as the U.S. president suggested a path toward de-escalation in the US-China trade war, but the real test will come when Trump and China sit down at the negotiating table. As for Powell, he and the FOMC are still waiting for more data before settling on the first rate cut of 2025.