Gold Surges As US-China Trade Talks Loom

Gold prices rallied over 1% on Friday, climbing to $3,340 per ounce as investors positioned themselves ahead of a pivotal weekend meeting between U.S. and Chinese officials in Switzerland, with markets closely monitoring developments that could determine the trajectory of global trade relations and safe-haven demand in the coming months, according to CNBC’s commodity market report.

The precious metal has gained 3.1% for the week, bouncing back from recent pullbacks as the dollar index edged 0.3% lower and President Donald Trump suggested that an 80% tariff on Chinese goods “seems right” ahead of the high-stakes negotiation between Treasury Secretary Scott Bessent and Chinese economic tsar He Lifeng.

Dollar Weakness Fuels Precious Metals

The weakening U.S. currency has provided significant support for gold prices, making the dollar-denominated commodity more affordable for holders of other currencies. This inverse relationship has been particularly pronounced as currency markets react to shifting expectations around trade policy and Federal Reserve interest rate decisions.

“The dollar’s retreat reflects growing uncertainty about the economic outlook, particularly as we approach these crucial trade discussions,” said Sam Richards, market analyst at the World Gold Council. “When combined with lingering geopolitical tensions, we’re seeing classic conditions for gold appreciation.”

Trade Talk Expectations

Market sentiment has swung dramatically in recent days following the announcement that U.S. trade representatives will meet with their Chinese counterparts in Geneva this weekend. This development comes after weeks of escalating tensions that saw the U.S. raise tariffs on Chinese goods to a cumulative 145% while China implemented retaliatory measures.

The high-profile meeting between U.S. Treasury Secretary Scott Bessent and Chinese economic official He Lifeng represents the most significant attempt at diplomatic engagement since the trade war intensified in April. Neither side has provided specific details about the agenda, but analysts suggest the talks could establish a framework for de-escalation.

Volatility Reflects Market Uncertainty

Gold has experienced substantial price swings throughout 2025 amid the evolving trade landscape. After reaching an all-time high of $3,500 per ounce in April following Trump’s initial tariff announcements, the metal retreated as market sentiment improved following the administration’s 90-day tariff pause for most countries except China.

“Gold is being caught between competing forces,” explained Ole Hansen, head of commodity strategy at Saxo Bank. “While the short-term correction has been driven by improved market sentiment, the structural drivers underpinning gold’s strength remain firmly in place.”

Geopolitical Tensions Add Support

Beyond trade concerns, heightened geopolitical risks continue to support gold’s appeal as a traditional safe-haven asset. Fresh military exchanges between nuclear-armed neighbors India and Pakistan have raised alarm across global markets, with both countries accusing each other of launching new attacks using drones and artillery.

This regional conflict adds to an already tense global picture that includes ongoing conflicts in Ukraine and the Middle East, all of which have contributed to gold’s remarkable 27% price increase since the start of the year as investors seek protection from uncertainty.

Central Bank Buying

Institutional demand has provided an additional floor for gold prices throughout the recent volatility. Central banks, particularly from emerging markets, have continued their multi-year trend of increasing gold reserves as a diversification strategy away from dollar-denominated assets.

“We see central banks buying, so as long as we see inflows into ETFs and more of the monetary policy risks, there’s a lot of key drivers that will continue to support gold,” noted Alex Ebkarian, chief operating officer at Allegiance Gold. This institutional purchasing provides significant underlying support even during periods of price correction.

Outlook Remains Bullish

Market analysts maintain a predominantly bullish outlook for gold through 2025 despite short-term fluctuations. The combination of trade uncertainty, geopolitical risks, and expectations for Federal Reserve interest rate cuts later this year creates favorable conditions for continued strength in precious metals.

However, significant risks remain. Further progress in trade negotiations could diminish gold’s appeal as a safe haven, with some analysts suggesting prices could retreat to around $3,200 if substantive deals emerge from the weekend’s talks. Conversely, a breakdown in negotiations could potentially drive prices back toward record territory.

As investors closely monitor developments in Geneva, the gold market appears poised for continued volatility in the days ahead, with trading strategies increasingly focused on headlines emerging from the high-stakes diplomatic engagement between the world’s two largest economies.