Major breakthrough in China-US trade negotiations! Gold plunges

The market is waiting for more details of the China-US talks. If better than expected, gold prices will have further room to fall.

On May 12, the price of gold fell sharply below $3,300.

On the news front, the high-level economic and trade talks between China and the United States made substantial progress and reached important consensus. In addition, geopolitical tensions such as the India-Pakistan conflict have eased and global risk aversion has receded.

U.S. stock futures rose collectively, with Nasdaq 100 index futures rising by more than 1%. USD/JPY rose above 146.

"The easing of trade, economic and geopolitical tensions could boost market risk sentiment," said Valentin Marinov, head of G10 FX research and strategy at Credit Agricole SA. "The latest developments could be a boon for risk-correlated assets and currencies and hit safe-haven currencies such as the yen, Swiss franc and even the euro."

"Gold prices could test the lower end of the current $3,200 to $3,400 range if progress continues in U.S.-China trade talks," said Robert Rennie, head of commodities at Westpac.

“We need to see the details over the next few trading sessions before we know how far gold will pull back. For anyone shorting gold on the back of an improvement in the trade deal, the first target would be $3,100,” said Nick Twidale, chief market analyst at AT Global Markets.

However, some people remain skeptical about the current market trends.

"The details of the deal will come out later. Any disappointment would reverse these moves," said Win Thin, global head of market strategy at Brown Brothers Harriman in New York.

Some analysts pointed out that there are undercurrents in the India-Pakistan and Russia-Ukraine crises, and the wave of risk aversion will come back.