Impact of US-China Trade Deal and India-Pakistan Relations on Gold Market
On Monday, the price of gold fell by 3% due to a decrease in risk sentiment following the announcement of a temporary agreement between the United States and China to reduce tariffs in the short term. The decline in gold prices was also influenced by the easing of tensions between India and Pakistan.
Gold Performance
- Spot gold dropped 3% to $1,225.28 per ounce.
- Gold futures in the US fell 3.08% to $1,241.
According to analysts from Investing, gold is likely to find support at $3,211.29 and resistance at $3,448.20 per ounce.
Experts’ Opinions
- Gabriela Siller, Director of Analysis at Banco Base: The preliminary agreement between the US and China reduced global risk aversion, decreasing demand for gold.
- Antonio Montiel, Analyst at Mercados Financieros in ATFX: The world’s two largest economies announced a temporary suspension of most mutual tariffs, reducing the perception of systemic risk and, consequently, demand for safe-haven assets like gold.
Geopolitical Factors and Ongoing Concerns
Despite the short-term correction, fundamental factors continue to support gold: persistent geopolitical risks, accommodative monetary policies by central banks in various regions, and growing concerns over global sovereign debt levels.
“Although gold reacted swiftly to the chaotic headlines from the White House last month, it has become vulnerable as President Trump’s stance appears to be softening,” said Adrián Ash, Director of Research at BullionVault.
“With the current more optimistic backdrop, gold may find upside potential amidst any reversals in this optimism,” Ash added.
US-China Trade Agreement Details
The United States will reduce additional tariffs imposed on Chinese imports in April from 145% to 30%, while China will lower tariffs on US imports from 125% to 10%. The new measures will be effective for 90 days.
Industrial Metals Gain
Prices of industrial metals rose on Monday as fears about growth and demand eased following the agreement between China and the US to reduce import tariffs and seek an end to their trade war.
- Copper reference price on the London Metal Exchange (LME) increased by 0.7% to $9,507 per metric ton.
- Aluminum gained 2.5% to $2,477.
After talks with Chinese officials, US Treasury Secretary Scott Bessor said both sides had agreed to a 90-day pause on measures and tariff reductions of over 100 percentage points to a benchmark rate of 10%.
Market Cautious Optimism
Traders remain cautiously optimistic, as there is hope for a resolution to the tariff situation but uncertainty remains. Analysts from Societe Generale noted, “In the next 90 days, we expect significant anticipation of trade flows between the US and China.”
Impact on Mexican Company Peñoles
Peñoles, the world’s leading silver producer, experienced significant declines on the Mexican Stock Exchange (BMV) on Monday due to the drop in international gold prices following the US-China trade agreement.
- Peñoles’ stock price fell 7.65% to 387.50 pesos per share, its lowest level since May 2 of this year.
- The decrease in gold and silver prices caused investors to distance themselves from safe-haven assets.
Peñoles reported first-quarter earnings of $1,798 million, an almost 29% increase compared to the same period last year. Intercam analysts highlighted that Peñoles’ operating cash flow (EBITDA) tripled due to metal price performance, with gold prices rising 38% and silver prices increasing by 36%. These metals account for 69% of Peñoles’ consolidated revenues.
Key Questions and Answers
- Q: Why did gold prices drop? A: Gold prices fell due to a decrease in risk sentiment following the US-China trade agreement and easing tensions between India and Pakistan.
- Q: How did industrial metals perform? A: Industrial metal prices, such as copper and aluminum, rose due to reduced fears about global growth and demand.
- Q: What are the details of the US-China trade agreement? A: The US will cut additional tariffs on Chinese imports from 145% to 30%, while China will lower tariffs on US imports from 125% to 10%. The new measures will be in effect for 90 days.
- Q: How is the market feeling about this agreement? A: Traders are cautiously optimistic, hoping for a resolution to the tariff situation but remaining uncertain about its outcome.
- Q: How did Peñoles perform on the BMV? A: Peñoles’ stock price fell 7.65% due to the drop in gold and silver prices following the US-China trade agreement.
