The price of gold fell below $3,300 per troy ounce, after previously surpassing $3,400, the highest since its record two weeks earlier. This decline followed news about upcoming trade talks between the US and China in Switzerland and the announced trade agreement between the US and the UK.
The drop in gold prices demonstrates how previous increases were driven by the US tariff conflict. The potential for tariff reduction could further impact gold’s value, especially with an agreement between the US and China.
Fed Comments Impact
Compounding this, comments from Fed Chairman Powell cooled expectations for early interest rate cuts. Despite criticism from US President Trump, the comments contributed to the downward trend in gold prices.
What we’re seeing here is a clear reaction to a change in perceived risk and future liquidity conditions. The sharp retreat in gold pricing—from above $3,400 to levels below $3,300 per troy ounce—highlights how much of the recent rally was based on geopolitical friction rather than traditional store-of-value demand. As trade developments between the US and China shift towards dialogue, particularly with meetings lined up in Switzerland, the urgency to hedge against economic uncertainty appears to be easing.
With an additional US-UK trade accord now on the table, markets are positioning themselves ahead of any weakening in tensions. Traders betting on prolonged instability may find themselves needing to reassess, especially if talks produce even a framework for tariff rollbacks. Gold, being sensitive to macroeconomic risk, reacts swiftly when such tail risks begin to shrink.
Powell’s recent remarks added weight to that de-risking sentiment. While there’s no shortage of criticism from leadership circles, the Fed chair’s reluctance to commit to near-term easing quieted any lingering expectations for looser monetary policy in the short term. In real terms, this means a firmer dollar, tighter liquidity, and less incentive to hold non-yielding assets like gold.
Market Reactions
We have to recognise what’s priced in. Expectations of a dovish policy turn had been supporting precious metals throughout the year. Powell walked that sentiment back. With him refraining from confirming any schedule for a rate reduction, there’s diminished scope for a breakout above recent highs—unless, of course, the economic data turns sharply or geopolitical risks re-escalate.
From our standpoint in the derivatives market, this shift changes how we approach the short-to-medium term. There’s less of a case now to lean into strategies built around aggressive bullish momentum for gold. If anything, options activity should expand around lower strike levels. Spreads widened earlier in the quarter can be closed or reweighted in favour of elevated implied volatility, especially should trade headlines resume their back-and-forth nature.
Moreover, while long futures positions may still tempt base-case hedgers, the rationale becomes thinner as reasons for defensive exposure fade. A recalibration of long gamma strategies might be warranted, especially if we see tighter ranges holding in the spot market. Traders focusing on calendar spreads should also monitor key macro release windows, as gradual pricing shifts around Powell’s neutrality tend to show up first in front-month contracts.
There’s also a signal here around positioning and liquidity. When stress factors ease—whether trade risks or monetary signals—the bid for safety unwinds fast. This isn’t a taper, it’s a real-time response to clarity. Gold doesn’t fall in a vacuum; it’s the fading lure of insurance that brings the descent.
Markets have given us a moment to rethink. It doesn’t promise stability, but it adjusts the likelihoods. We watch for confirmation—not just from central banks or trade headlines, but from the structure of how traders are reacting. Right now, there’s no rush to re-enter long gold positions unless fundamentals justify it. And those fundamentals are less convincing than they were just two weeks ago.
