Background on Key Figures and Context
The recent decline in gold prices marks a more than 2% drop on Wednesday, reaching its lowest level in over a month. This shift is attributed to growing trade optimism, which has fueled investors’ appetite for risk and caused them to divest from gold.
Donald Trump, the President of the United States, has been actively engaging in trade negotiations. He mentioned the possibility of direct talks with Chinese President Xi Jinping regarding trade deal details. Additionally, Trump hinted at working on “possible agreements” with India, Japan, and South Korea.
Historically, gold has been regarded as a safe haven during times of geopolitical and economic turbulence. Its price soared to a record high of $3,500.05 last month. This year alone, gold’s value has increased by 21.2%.
Impact of Trade Developments
Washington and Beijing agreed to significantly reduce tariffs and adopt a 90-day truce while finalizing trade deal details. This positive development has led to a technical correction in gold prices.
Industrial Metals Gain Momentum
In contrast to gold, prices for industrial metals like copper, aluminum, and zinc have risen to their highest levels since early April. This upward trend is due to increased risk appetite in growth-dependent metals, fueled by the trade truce.
- Copper reference price on the London Metal Exchange (LME) remained stable at $9,600.50 per metric tonne after hitting a high of $9.64 since April 2.
- The LME metal prices plummeted the day after Trump’s April 2 announcement of tariffs against all countries, fearing a global recession and reduced demand due to a potential trade war.
- These concerns lessened following the recent tariff truce announcement and gained further support when Goldman Sachs raised its 2025 Chinese GDP growth forecast to 4.6% from the previously expected 4%.
Investors have shifted away from safe-haven assets like gold and back into industrial sectors, though their participation remains cautious at this early stage.
Chinese Metal Demand and U.S. Investigations
In China, the largest metal consumer, social financing outstanding—an indicator of future demand—increased by 8.7% in April, reaching its highest level in 13 months following increased government bond emissions.
Market attention remains focused on the U.S. investigation into potential new tariffs on copper imports, which began in February. As a result, the premium for COMEX copper futures over LME reference prices is high, and there have been deliveries against COMEX copper inventories.
- Copper rose 1.2% to $6,795 per metric tonne.
- Aluminum increased by 1.4% to $2,524.50 per metric tonne.
- Zinc went up by 1.9% to $2,757 per metric tonne.
- Lead advanced by 0.1% to $1,989.50 per metric tonne.
- Tin strengthened by 0.5% to $32,820 per metric tonne.
- Nickel climbed 0.9% to $15,870 per metric tonne.
Key Questions and Answers
- Q: Why are gold prices falling? A: Gold prices have fallen more than 2% on Wednesday to their lowest level in over a month due to growing trade optimism, which has increased investors’ appetite for risk and caused them to divest from gold.
- Q: Who are the key figures mentioned in this article? A: The key figures mentioned are U.S. President Donald Trump and Chinese President Xi Jinping, as they are actively engaged in trade negotiations.
- Q: How have industrial metals been affected by the trade developments? A: Industrial metals like copper, aluminum, and zinc have seen their prices rise to their highest levels since early April due to increased risk appetite in growth-dependent metals, fueled by the trade truce.
- Q: What is the current status of metal demand in China? A: Social financing outstanding in China, an indicator of future demand, increased by 8.7% in April, reaching its highest level in 13 months following increased government bond emissions.
