Gold’s $4,696 Tug-of-War: Geopolitical Fears Meet Hawkish Fed as Trump Heads to Beijing

Gold edged lower on Tuesday, slipping to $4,695.80, as investors weighed a tangle of conflicting drivers. The metal lost 1.05% from Monday’s close of $4,745.60, despite an escalation of violence in the Middle East and stubbornly high US inflation that normally would fuel safe-haven demand. The immediate catalyst for the pullback lies in Beijing, where President Donald Trump is due to arrive on Wednesday for a three-day summit with Xi Jinping.

The agenda covers trade, Taiwan, and the Iran crisis, and a high-powered business delegation including Tim Cook and Elon Musk is accompanying the president. Markets are pricing in the possibility of a diplomatic thaw, which would boost risk appetite and undermine gold’s haven appeal. For China, the stakes are especially high: the blockade of the Strait of Hormuz has pushed Brent crude to $107 a barrel, locking up Chinese tankers and cutting vital oil imports. Xi has a strong economic incentive to push for de-escalation.

On the other side of the scale, the US inflation picture is tightening the screws. Consumer prices rose to 3.8% in April, above forecasts, and the energy component is adding further pressure. Traders have all but written off Federal Reserve rate cuts this year, and some are now pricing in a 25-36% probability of an actual hike. Higher real yields on government bonds make the non-yielding metal less attractive, while a stronger US dollar compounds the headwind for international buyers.

Should investors sell immediately? Or is it worth buying Gold?

Central banks remain net buyers — they added 244 tonnes net in the first quarter — but the high price is crushing jewelry demand, which dropped 23% to under 300 tonnes, the weakest quarterly tally since the pandemic. After heavy outflows in March, physically backed gold ETFs are seeing a mild revival, especially among European investors seeking protection. Yet that has not been enough to push prices higher.

The mining sector offers a brighter picture. Barrick Gold posted net profit of $1.60 billion in its latest quarter, up sharply from $474 million a year earlier, on production of 719,000 ounces. OceanaGold reported high-grade drilling results from the Haile mine in the US, with intercepts showing 30.64 grams per tonne over 15.5 metres. Such exploration success supports long-term supply expectations, but does little to shift the short-term price dynamic.

Technically, gold remains in no man’s land. It is trading below the 50-day moving average of $4,758.86, while the relative strength index at 49.8 signals neither oversold nor overbought conditions. The metal’s fate now hinges on whether Trump and Xi can deliver concrete steps for Middle East de-escalation by Friday. Without a breakthrough, safe-haven flows could quickly return. But if inflation data continues to steer the Fed toward tightening, any rally may prove short-lived.

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