In the early Asian market on May 9, spot gold slightly rebounded, currently trading around $3319.75 per ounce, supported by buying on dips. On Thursday, gold extended its decline, falling nearly 2%, hitting an intraday low of $3288.72 per ounce and closing at $3305.70 per ounce. This wave of decline is related to President Trump announcing a trade deal with the UK, which eased previous tensions with an optimistic outlook on the agreement, reducing the safe-haven demand for gold. Meanwhile, rises in the dollar, U.S. stocks, and U.S. Treasury yields also put pressure on gold prices.
On Thursday, Trump and UK Prime Minister Starmer announced a "breakthrough agreement" on trade issues. Although the U.S. continues to impose a 10% tariff on imports from the UK, the UK has agreed to lower its tariffs from 5.1% to 1.8%, offering more market access for American goods. This agreement is seen by the market as a positive signal, indicating that the Trump administration's trade policies with friendly countries will set a benchmark tariff, providing the possibility for further negotiations.
Additionally, U.S. Treasury Secretary Besant and Trade Representative Greer are scheduled to meet with China's top economic official on Saturday, sparking expectations in the market for an easing of global trade tensions, further suppressing safe-haven buying in gold. RJO Futures' market strategist Bob Haberkorn noted that if a U.S.-China trade agreement is reached, the upside potential for gold will be limited, with prices potentially falling back to around $3200.
As gold prices decline, both the dollar and U.S. stocks have risen significantly. The dollar index reached a new high since April 11 during Thursday's session, hitting 100.76, and closed at 100.63, marking the second consecutive day of gains. Meanwhile, the yield on the U.S. 10-year Treasury also rose to 4.375%, the highest level in weeks, further diminishing gold's appeal.
Although gold prices are under pressure in the short term, there is still some support. Market optimism regarding future global trade developments and cooling expectations of a Federal Reserve rate cut have led to an outflow of funds from gold into more risk-prone assets like stocks. However, buying on dips continues to support gold prices, and the demand for gold as a safe-haven asset has not entirely disappeared.
The European Commission's statement further increased market uncertainty. If negotiations with the U.S. fail to achieve substantive progress, the EU may impose retaliatory tariffs on American imports worth up to 95 billion euros, potentially exacerbating market anxiety.
In addition, a major Asian country has recently relaxed restrictions on foreign exchange purchases for gold imports, providing potential support for gold demand, especially as commercial banks gradually increase demand for dollar purchases.
Overall, the short-term trend in the gold market is influenced by multiple factors. Despite being weighed down by optimism over trade agreements, safe-haven demand still exists, and gold prices will continue to reflect the uncertainty of global economic and trade conditions.
