Gold prices were steady on Thursday as investors focused on upcoming talks between U.S. President Donald Trump and Chinese President Xi Jinping, as well as awaiting any signs of progress in efforts to end the war with Iran.
Brian Lan, CEO of GoldSilver Central, said gold is currently in a consolidation phase, as investors await the outcome of high-level talks between the United States and China.
He added that the yellow metal tends to decline slightly, but this decline may represent a suitable opportunity for investors wishing to build new positions at more attractive levels.
The Trump-Xi summit takes center stage
Trump is heading to the Chinese capital, Beijing, for a series of meetings with Chinese President Xi Jinping, in an attempt to achieve economic gains, maintain the fragile trade truce between the two countries, and discuss complex international issues, most notably the war in the Middle East.
The US president is expected to seek Chinese support to help end the costly and unpopular war he started with Israel in late February, but many analysts believe his chances of getting the support he seeks appear limited.
The markets are closely monitoring these meetings, as any progress in relations between the world's two largest economies or any breakthrough in the Iranian issue could directly affect risk appetite, the movement of the dollar, and the direction of gold prices.
Inflation data reshapes interest rate expectations
Data released on Wednesday showed that U.S. producer prices posted their biggest increase in four years in April, driven by rising costs of goods and services, in the latest sign of accelerating inflationary pressures.
In a significant development, the US Senate approved the appointment of Kevin Warsh as chairman of the Federal Reserve, at a time when the US central bank faces an increasing challenge in controlling inflation, which could make it more difficult to implement the interest rate cuts that Trump has repeatedly demanded.
According to the US interest rate forecast tracking tool available on Investing Saudi, market bets on interest rate cuts this year have declined significantly, while the probability of an interest rate hike by December has risen to 28%.
Although gold is a traditional way to hedge against inflation, rising interest rates increase the appeal of yield-generating assets, putting pressure on the precious metal, which does not provide a periodic return for investors.
Indian demand is declining, and other metals are mixed.
Discounts on gold in India widened to a record high above $200 an ounce on Wednesday, after a sharp rise in prices following increased import duties triggered a sell-off by investors in a market already suffering from weak demand.
This development reflects a decline in demand in one of the world's largest gold markets, which may limit the precious metal's ability to regain strong upward momentum in the coming period.
Gold at settlement yesterday
Gold prices rose at the close of trading on Wednesday, despite concerns about the stalled diplomatic process between the United States and Iran, and new signs of rising inflationary pressures in America.
Gold futures for June delivery rose 0.42%, or $20, to $4,706.70 an ounce.
Gold now
The price of gold in spot trading settled at $4,689.49 per ounce.
Meanwhile, U.S. gold futures for June delivery fell 0.2% to $4,696.40 an ounce.
Other minerals
As for the other precious metals, silver fell 0.9% to $87.19 an ounce, platinum declined 0.2% to $2,133.35, while palladium rose 0.1% to $1,501.25 an ounce.
