Gold began the new week with two impressive bullish sessions, clearly reflecting a defensive sentiment across global markets as geopolitical tensions between Russia and Ukraine flared up once again.
Ukraine’s surprise offensive targeting Russia’s strategic infrastructure reignited concerns over European security risks and fueled expectations that the conflict could escalate or persist in the coming period. Against this backdrop, gold, as a traditional haven, quickly attracted defensive capital flows, propelling prices toward $3,434/oz, the highest level in over a week.
However, as the Asian session opened this morning, gold’s upward momentum temporarily stalled as market attention shifted to developments on the U.S.–China trade front.
According to official sources, U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet with Chinese officials in Switzerland this week to restart the stalled bilateral trade negotiations that had deteriorated amid a renewed wave of tariff tensions under the Trump administration.
This development is seen as a constructive step, at least psychologically, helping to temporarily ease market fears of a potential return to a full-scale trade war.
However, in a broader context, the resumption of talks does not guarantee substantive outcomes, especially given that both sides continue to maintain firm stances on several core issues.
Historically, U.S.–China trade discussions have frequently fallen into deadlock or reversed course due to hostile rhetoric from either side. As such, investors remain cautious and are likely to await clearer signals from the negotiations, a factor that could keep gold trading within a narrow range in the short term.
In parallel with geopolitical and trade dynamics, another critical factor shaping market expectations is U.S. monetary policy. At present, most investors still anticipate the Federal Reserve will begin cutting interest rates in September, especially after recent inflation data pointed to a cooling trend.
However, markets remain highly sensitive to any signs of a shift in this outlook. Upcoming remarks from Fed officials, along with fresh economic data, could serve as key catalysts, potentially triggering heightened volatility across financial markets, including gold.
Overall, the precious metal is currently influenced by three primary forces: lingering geopolitical instability, uncertain trade expectations, and monetary policy in a transitional phase.
In this context, the recent pullback in gold prices following a sharp rally is both natural and necessary, allowing the market to stabilise and reassess its direction. Unless an unexpected shock emerges, gold may continue to consolidate in the near term, before resuming a clearer trend once major macroeconomic signals become more definitive.
By Linh Tran, Market Analyst at XS.com
