Gold is down 8% from October highs due to ETF outflows and Fed signals.
Gold is holding near $4,021.86 per ounce, staying close to the $4,000 mark as traders look at the new U.S.-China one-year trade truce and try to figure out what it actually means.
The price has moved back and forth this week, but it has not broken down in a major way. Spot prices fell as much as 0.9% earlier on Friday before recovering.
The market is reacting to comments from Xi Jinping, who warned against “breaking supply chains” in his first public remarks after meeting Donald Trump. The talks created a pause, but no one is calling it long-term peace.
Both sides are simply buying time while they continue to pull apart in technology, supply sourcing, and influence.
Even with the temporary pause, it does not erase the long-term competitive pressure between the two largest economies. Investors are treating it as a cooling period, not a fix. The calm has not been enough to remove the broader demand for assets that people move to when things look unstable.
That helps explain why gold is still up this month and still seen as a hedge even while prices have pulled back from their highs.
Rate signals and ETF outflows pressure bullion
Gold is down more than 8% from its record high above $4,380 on October 20, marking its second weekly decline. A big reason is shifting expectations around the Federal Reserve.
After cutting rates by a quarter-point on Wednesday, Jerome Powell said investors should stop assuming another cut will happen in December. Those remarks reduced some of the fuel behind gold’s earlier surge.
Gold-backed exchange-traded funds (ETFs) have also seen investors pull money. Holdings fell for six straight days before showing small inflows again on Thursday, based on data from Bloomberg.
These flows matter because ETFs helped drive a lot of the run toward $4,400. Now, not only are fewer people buying, but some are outright leaving.
Robert Rennie of Westpac said a “combination of a hawkish cut, a truce in the US-China trade war, plus heavy outflows from the gold ETFs is all adding to the corrective mood.” He added that bullion could fall to around $3,750 if the pressure continues.
Central banks buy more as investors watch global equities
Even with the recent drop, gold is still up more than 50% this year. The World Gold Council reported a strong wave of central bank buying, with purchases rising 28% in the third quarter compared to the previous one.
Earlier this year, central bank buying slowed. Now it is moving the other way again. This is happening at the same time that mainstream investors are using gold to limit portfolio risk.
As of 11:23 a.m. in New York, spot gold was down 0.2% at $4,017.27. The Bloomberg Dollar Spot Index rose 0.2%. Silver and palladium saw small gains. Platinum slipped.
In the stock market, the S&P 500 is priced at 23 times forward earnings, compared to a 20-year average of 16.
The “Magnificent Seven” tech stocks make up over one-third of that benchmark. Their valuations sit around 31 times forward earnings, which makes some investors nervous about bubble risk.
A Bank of America team led by Michael Hartnett said, “AI equity leadership ain’t budging for the time being, and we like gold & China stocks as best boom/bubble hedges.”
The same team noted that outflows from global gold funds hit a record $7.5 billion in the latest weekly data from EPFR, after four months of inflows.
On the other side, Chinese stocks have surged, with the MSCI China Index up 33% this year, helped by optimism around generative AI after DeepSeek’s emergence.
But the index is now close to ending a five-month winning streak, as investors refocus on U.S.-China tensions and China’s economic challenges.
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