The gold price dipped 1% on Wednesday, sliding to $3,390 as optimism over US-China trade talks reduced safe-haven demand, even as India-Pakistan tensions escalated sharply. Investors are now cautiously watching developments from Switzerland and the upcoming Federal Reserve decision later in the day.
The U.S. and China confirmed that high-level representatives will meet in Switzerland over the weekend to ease rising tariff tensions. Treasury Secretary Scott Bessent and USTR Jamieson Greer will represent the U.S., while China’s Vice Premier He Lifeng leads Beijing’s delegation. Bessent clarified that the initial meetings will focus on de-escalation, not formal trade negotiations.
India-Pakistan Conflict Flares, But Trade Talks Take Center Stage
Overnight, geopolitical risk spiked after India and Pakistan exchanged military strikes, with Pakistan claiming it had downed five Indian fighter jets and captured personnel. Typically, such conflict between nuclear-armed neighbors would drive gold higher as a safe-haven asset.
Additionally, market participants appear to be positioning ahead of the Fed’s rate decision, with the CME FedWatch Tool showing a 95.6% probability of no change in interest rates. President Trump has applied political pressure for rate cuts, but Fed Chair Jerome Powell appears set to maintain the current stance, pending the effects of tariffs on inflation and growth.
Gold Correction Within Bullish Context
Gold’s recent pullback follows a two-day winning streak, with the correction appearing technically justified as trade dialogue begins. The downside remains limited unless either talks rapidly advance or India-Pakistan tensions ease significantly.
- Resistance: The first upside test remains at $3,469, while the all-time high at $3,500 must be broken to unlock R2 at $3,508.
- Support: The Pivot Point at $3,396 is the first level to monitor for daily closes. A deeper dip could find support at $3,358 (S1) and $3,285 (S2), with a strong base near $3,245 likely holding any major reversals.
Caution Ahead of Fed and Switzerland Talks
For now, gold price dips may be short-lived unless meaningful breakthroughs emerge from the trade discussions. Any negative headlines from the Swiss meetings or a hawkish surprise from the Fed could reignite bullish pressure on XAU/USD.
Simultaneously, further India-Pakistan escalations could shift sentiment back toward safe-haven demand, creating potential for sharp rebounds.
With gold still trading close to record highs, investor attention will remain focused on headline risk and central bank positioning.
About The Author
