Gold prices fall after Trump-Xi call eases global tensions

07:50

By: Dakir Madiha

Gold prices fall after Trump-Xi call eases global tensions

Gold prices dropped sharply on Thursday after briefly surpassing $5,000 per ounce, as a phone call between U.S. President Donald Trump and Chinese President Xi Jinping calmed international tensions and diminished demand for the metal as a safe-haven asset.

This decline caps a wildly volatile period in the precious metals market. Gold started 2026 at $4,313 per ounce, soared to a record near $5,600 by late January, then plunged below $4,700 in a dramatic correction. It clawed back above $5,000 on Wednesday before sliding again as markets absorbed signals of diplomatic progress on multiple fronts.

The Trump-Xi conversation, described as excellent, covered trade, Taiwan, Iran, and a planned U.S. presidential visit to Beijing in April. It marked the first substantive dialogue between the leaders since November, hinting at a thaw in U.S.-China relations. Analysts noted that renewed U.S.-Iran talks set for Oman on Friday could further ease geopolitical risks that had driven up commodity prices following recent military clashes in the Arabian Sea.

"Sycore, an analyst at IG, highlighted how these negotiations have trimmed the geopolitical risk premium on commodity markets," according to reports. Silver tumbled nearly 15 percent that day, while gold and copper each fell about 2 percent amid a strengthening U.S. dollar.

The pullback follows January's historic crash, sparked by Trump's nomination of Kevin Warsh as the next Federal Reserve chair on January 30. Gold plunged 11 percent that day—its steepest drop since 1983—while silver cratered 31.4 percent, the worst session since 1980. "January was the most volatile month ever for precious metals," said Nicky Shiels, strategist at MKS. The sell-off intensified as CME Group raised gold margin requirements from 6.6 percent to 8.8 percent and silver's from 12.1 percent to 16.5 percent.

Yet gold remains up roughly 75 percent over the past year. Major banks hold bullish long-term outlooks; JPMorgan forecasts $6,300 per ounce by the end of 2026, driven by central bank demand projected at around 800 tonnes this year.

Fundamentals supporting gold stay robust despite short-term swings. Central banks bought 863 tonnes in 2025, accelerating diversification trends post-2022 Western sanctions on Russian assets. "Gold remains a dynamic, multidimensional portfolio hedge, with investor demand exceeding prior estimates," wrote J.P. Morgan analysts led by Gregory Shearer. Record inflows into gold ETFs and steady retail buying have provided ballast, even as leveraged traders cut positions. The World Gold Council anticipates 5 to 15 percent gains in 2026 under moderate economic slowdown scenarios, with bigger upside if global risks escalate.