Gold prices (XAU/USD) recovered some lost ground, trading around $4,660 during the early Asian session on Friday, as traders focused on the ongoing summit between US President Donald Trump and Chinese President Xi Jinping in Beijing [1]. The summit, which began on Thursday and is set to last two days, is expected to address key issues such as tariffs and artificial intelligence. Both leaders called for improved US-China relations, with Xi Jinping assuring US business leaders that their companies could be 'deeply involved in China's reform and opening up,' and emphasizing that 'China's door will only open wider.' Trump noted that Xi offered help to resolve the conflict and pledged not to provide military equipment to Iran, while Xi expressed a desire to see the critical Strait of Hormuz reopened [1].
Market participants are closely watching the summit for signs of progress, particularly regarding the reopening of the Strait of Hormuz, which has significant implications for global trade and energy flows. Nicholas Frappell, global head of institutional markets at ABC Refinery, stated, 'The market is trying to decipher the likelihood of a potential end to hostilities in the Middle East and the Strait of Hormuz reopening fully.' He added that gold would benefit from a softer dollar and less aggressive policy tightening from central banks if the Strait reopens [1].
Despite the slight uptick in gold prices, the potential for further gains may be limited. Recent US economic data showed that the Producer Price Index (PPI) inflation accelerated to its fastest pace since 2022 in April, while the Consumer Price Index (CPI) rose the most since 2023. These figures have reinforced expectations that the Federal Reserve will maintain elevated interest rates to combat persistent inflationary pressures, making non-yielding assets like gold less attractive in a high-rate environment [1].
Gold is traditionally viewed as a safe-haven asset during periods of geopolitical uncertainty, but its lack of yield can weigh on demand when interest rates are high. Central banks remain significant buyers of gold, with emerging economies such as China, India, and Turkey increasing their reserves [1].
CONCLUSION
Gold prices have inched higher amid optimism surrounding the Trump–Xi summit and hopes for improved US-China relations, but upside may be capped by expectations of sustained high US interest rates. The market remains attentive to developments in the Strait of Hormuz and central bank policy signals, which could influence gold's trajectory in the near term.