Insights 
The US-China Tariff Agreement
Gold prices have fallen over 2.5% intraday following an agreement between the US and China to reduce tariffs for 90 days. China will cut its tariffs on US goods from 125% to 10%, while the US will decrease its tariffs on Chinese goods from 145% to 30%.
Gold prices dropped more than 3% during the European trading session, approaching $3,231. This price movement follows market responses to tariff reductions, prompting an exit from safe-haven assets like gold.
The US-China tariff agreement has resulted in rising US yields, with the 10-year yield reaching 4.43%. This may drive inflation, as trade tensions ease, potentially increasing commodity demand, such as oil, which rose over 2% to $62.50.
The US Treasury Secretary noted an interest in further cooperation with China. As stock markets respond positively, US futures gained 2.50% to 3%, while Chinese and European stocks also saw increases.
Further gold price declines might test support levels, potentially dropping below $3,200. A recovery could face resistance at $3,284, with potential targets up to $3,500.
Impact of Interest Rates on Gold Prices
Interest rates are pivotal in currency strength, affecting gold prices since higher rates increase the opportunity cost of holding gold. The Federal Reserve’s policies on interest rates influence gold’s appeal compared to interest-bearing assets.
Right, so what’s happening here is a push-and-pull of strong forces in the market reacting to this rather unexpected trade thaw between the US and China. The mutual tariff de-escalation is effectively shifting investor sentiment away from defensive positions. Gold, which often benefits from uncertainty, has taken a swift hit—falling well over 2.5% intraday as participants weighed the implications of reduced trade barriers. The steepest part of that decline came during European hours, where it slid past 3%, nearing the $3,231 level. That alone signals a quick reassessment of risk exposure, especially among those looking for protective cover.
What’s equally relevant is the expansion in US 10-year Treasury yields. With the benchmark reaching 4.43%, it’s evident that investors expect some inflationary pressure to creep in, or at least increased economic activity from the removal of trade restrictions. Higher yields increase returns on government debt, hence draining some of the appeal of non-yielding assets like gold. And this is exactly where traders would be considering their positioning going into the next few weeks.
The uptick in yields and the rally in global equities—US futures climbing 2.5% to 3%, alongside broader gains in both Chinese and European shares—suggest that risk appetite is broadening. Markets are repositioning. The Treasury Secretary, for his part, hinted at openness to more economic engagement with China. That adds another layer of expectation across risk assets, allowing for a more optimistic tone across equities, commodities, and select currencies.
In terms of technical markers, there’s still room to test additional downside in gold. If it breaks below the $3,200 level, we could see further liquidation-driven selling. However, watch for any bounce as it approaches $3,284, which may act as a near-term cap. Any sustained move above that could put $3,500 back in sight, though present momentum doesn’t favour such an outcome unless adverse data or geopolitical hiccups appear.
From our perspective, the rate environment is now top-heavy in its influence. The yield curve, while not inverted, is clearly pulling capital toward interest-generating instruments. This undercuts gold’s appeal. The Fed’s stance on interest rates—especially in light of these new trade developments—will remain key. If policy signals suggest continuation of higher-for-longer rates, gold could struggle to find its footing.
That means for short-term directional trades, we’re watching both inflation data and forward guidance from monetary authorities. With trade barriers softening, commodities like oil—already above $62.50—are getting a tailwind, which supports inflation risks. This, in turn, feeds into yield expectations.
So it’s hardly the time for one-directional positioning. Monitor bond yields and central bank communications closely. Volatility around gold could remain elevated over the next several sessions. Short-term support and resistance levels should be reassessed frequently, with one eye on broader macro shifts and institutional flows.
