GLOBAL MARKETS, 27 October 2025 – Gold prices are under pressure, holding just below the US$4,000-per-ounce threshold, as signs of fresh momentum in trade talks between the United States and China are reducing investor appetite for the precious metal as a safe-haven asset.
Trade Optimism Weakens the Safe-Haven Case
The rally in gold that lifted it briefly above US$4,000 earlier this month was largely driven by mounting fears around U.S. government shutdown, rising geopolitical risk and inflation pressure.
However, as diplomatic communications between Washington and Beijing advance and market optimism grows over potential trade easing, the urgency to hold gold as a crisis hedge is fading. Analysts note that when risk events appear receding, non-yielding assets such as gold lose some of their premium.
Key Drivers & Investor Implications for Asia
Drivers:
- Reduced geopolitical/ trade fear premium: With signs of U.S.–China dialogue improving, the catalyst for large-scale safe-haven buying is diminished.
- Opportunity cost of holding gold: When growth prospects improve, cash and risk-assets become more appealing compared to gold, which yields nothing.
- Monetary policy and interest-rate outlook: If markets anticipate monetary easing in response to trade support, the real yield on other assets improves, reducing the relative attraction of gold.
Regional implications (for Asian investors):
- Asian investors holding gold exposure may face short-term headwinds if safe-haven flows reverse.
- Given the increasing inter-linkage of Asian markets with global trade sentiment, local markets may likewise benefit from reduced trade tensions, but gold’s role in portfolios may need re-calibration.
- In Southeast Asia, where inflation and currency weakness often drive demand for gold, the shift in risk signals means alternative hedges (digital assets, diversified commodity exposure) may become comparable options.
Outlook: What to Watch
- U.S.–China trade dialogue updates: Any formal statements or breakthroughs could further weaken gold’s safe-haven premium.
- Inflation and real yields: If inflation remains elevated and real yields decline, gold might regain its appeal. Conversely, if real yields rise, gold may face renewed pressure.
- Technical levels and sentiment: Holding below US$4,000 is a psychologically significant threshold. A sustained break below might trigger further downside or correction from earlier highs.
- Asian central-bank and sovereign flows: Some Asian buyers maintain gold for reserve diversification; any shift in their behaviour will influence broader regional flows.
