Gold prices slump 10% in a week

• US-Japan deal fails to lift the Nikkei after 50k break.
• Trump optimism of US-China deal.
• Gold prices slump 10% in a week.

Equity markets through Asian and Europe have taken a turn today, with stocks losing traction ahead of a period of huge economic and corporate upheaval. Notably, the Nikkei steam train appears to have run out of fuel for the time being, with the index taking a breather after pushing through 50k yesterday. Talks between the new Japanese PM Takaichi and Trump resulted in a deal to strengthen the US’ access to rare earth minerals, following on from a similar deal with Australia. Notably, Trump even went as far as to remark that “anything you want, any favours you need, anything I can do to help Japan, we will be there,” calling them “an ally at the strongest level.” Nonetheless, with the Bank of Japan rate decision raising question marks over whether we are on the cusp of a hawkish turn that sets the stall for further rate hikes, it looks like the so-called Takaishi trade could be on hold over the coming days.

On a day that provides little by way of economic data, traders continue to retain a focus on US-China relations ahead of the Trump-Xi meeting later in the week. While on Air Force One, the US President did that that he thinks they are “going to come away with a deal." Coming hot off the heels of Scott Bessant’s comments that noted their “substantial framework” will avoid a tariff hike and discuss “many other things”, it comes as no surprise to see the big tech gain ground on the prospect of free-flowing rare earth materials.

Gold prices are being hit hard once again today, with the prospect of a trade deal between the world’s two largest economies dampening demand for the precious metals. China has been one of the biggest buyers of gold over the years, and thus there is a perception that perhaps a deal will turn the PBoC back in the direction of US treasuries. Some of the drivers behind the gold bull run do still remain in play to a large extent, with US debt breaching the 38 trillion mark and the Fed expected to cut rates and potentially end their quantitative tightening policy. Nonetheless, with speculators playing an increasingly important role over the course of 2025, it is clear that souring sentiment has sparked a sharp decline as trade concerns ease. For traders and investors alike, the question is when this correction phase will come to a halt, with gold having dropped 10% in the past week alone. The concern for many holders is the sheer volatility we are seeing for an asset that is supposed to be stable in nature, with this month seeing the biggest price volatility on record.