Gold recovered some of its losses after falling below $4,000 an ounce on Monday, as progress in US-China trade talks dampened demand for safe-haven assets.
The precious metal rose 0.9% on Tuesday, after falling 3.2% in the previous session, after negotiators from Washington and Beijing announced they had reached a series of agreements covering tariffs and export controls.
US Treasuries fell even as traders held onto bets that the Federal Reserve would ease monetary policy this week, as higher yields dampened demand for non-interest-bearing gold.
Gold rebounds after falling from its historic peak
Gold has fallen sharply from a record high above $4,380 an ounce last Monday following a strong rally, but it remains up more than 50% since the beginning of the year.
This performance was supported by central bank purchases, known as the carry trade, where investors avoid sovereign debt and currencies to hedge against growing fiscal deficits. This also attracted individual investors.
Chris Weston, head of research at Pepperstone Group, wrote in a note that while gold continues to hit new lows and futures trading volumes remain high on down days, pinpointing a bottom is a difficult task.
He added: At the moment, it makes more sense to let others do the hard work and buy tactical rallies after dips.
Kyoto Conference and Indicators of Weak Central Demand
Gold's rapid rise and recent decline were a key topic of discussion at the London Bullion Market Association's Precious Metals Conference in Kyoto, the gold industry's largest annual gathering.
John Reed, market strategist at the World Gold Council, said on Monday during the event that demand from central banks is no longer as strong as it once was, adding that a deeper price correction would be welcomed by professional traders.
Expectations of further decline and follow-up of the Federal Reserve meeting
Citigroup analysts, including Max Leighton, wrote in a note on Monday that the US shift towards deals with China, coupled with a shift in gold price momentum and the potential end of the US government shutdown, could push the metal further down in the coming days and weeks. They forecast gold could fall to $3,800 per ounce within the next three months.
Spot gold rose 0.8% to $4,015.35 per ounce by 9:27 a.m. in Singapore, while the Bloomberg Dollar Index fell 0.1%. Silver edged up after losing 3.7% on Monday, while platinum declined and palladium rose.
Anticipating the interest rate decision and the selection of Jerome Powell's successor
Federal Reserve policymakers are widely expected to cut interest rates by 25 basis points at their two-day meeting, which concludes on Wednesday, marking the second consecutive cut. Lower borrowing costs typically support non-interest-bearing precious metals.
Meanwhile, markets are monitoring the list of five candidates to succeed Federal Reserve Chairman Jerome Powell, who is expected to step down in May.
Treasury Secretary Scott Besant confirmed Monday that the list of candidates has been narrowed to include current Federal Reserve Board members Christopher Waller and Michele Bowman, former board member Kevin Warsh, White House National Economic Council Director Kevin Hast, and BlackRock executive Rick Rieder.
