Gold prices declined on Thursday amid renewed optimism over a potential trade agreement between the United States and the United Kingdom, reducing demand for the metal as a safe-haven asset. U.S. gold futures slipped 1.4%, to $3,345.10.
According to reports, President Donald Trump is expected to announce a trade deal with the UK, marking a potential de-escalation in global trade tensions. Analysts suggest that any improvement in international trade relations tends to reduce economic uncertainty, which in turn weakens investor demand for gold.
In addition to developments with the UK, markets are closely watching the upcoming US-China trade talks. President Trump noted that China initiated the next round of high-level negotiations, but emphasized he would not reduce tariffs simply to bring Beijing to the table. This stance adds a layer of uncertainty to the discussions, which could affect market sentiment and gold prices.
Meanwhile, the Federal Reserve left interest rates unchanged on Wednesday, while warning of increased risks related to inflation and unemployment. These concerns stem in part from the ongoing effects of U.S. trade policy. Analysts now believe the Fed may consider a rate cut in September if economic indicators worsen.
Elsewhere, geopolitical tensions in South Asia flared after India launched strikes in Pakistan and Pakistani-controlled Kashmir, responding to the killing of tourists in the region last month. Pakistan vowed to retaliate and claimed to have downed five Indian aircraft.