Gold Gains on Weaker Dollar as US-China Talks Come Into Focus

June 9, 2025 — Gold prices edged higher on Monday, buoyed by a softer U.S. dollar and growing investor focus on the upcoming diplomatic talks between the United States and China. The precious metal remains sensitive to geopolitical uncertainty and currency fluctuations, with market participants recalibrating expectations around the Federal Reserve’s next monetary policy move.

Dollar Weakness Lends Support

The U.S. dollar dipped against a basket of major currencies, making gold more attractive to non-dollar investors. The dollar index (DXY) fell 0.3% to 103.45 in early Asian trade, reversing some of last week’s gains.

“Gold is regaining some momentum due to the dollar’s pullback and safe-haven demand as investors look ahead to this week’s high-level talks between Washington and Beijing,” said Ravindra Rao, Head of Commodity Research at Kotak Securities. “Any thawing in U.S.-China relations could ease market tensions, but the uncertainty surrounding the discussions is boosting gold’s appeal in the interim.”

Spot gold rose 0.6% to $2,364.78 per ounce by 12:00 GMT, while U.S. gold futures gained 0.5% to $2,372.30.

Geopolitical Developments in the Spotlight

The upcoming talks between top U.S. and Chinese officials—slated to begin Wednesday—will address trade barriers, semiconductor restrictions, and broader strategic tensions. With U.S. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng expected to meet in Singapore, investors are on edge for any indications of diplomatic progress.

“Markets are treading carefully ahead of the dialogue,” said Jeffrey Halley, Senior Market Analyst at OANDA. “While constructive rhetoric could lift sentiment in equity and riskier assets, any signs of discord may further inflame demand for safe-haven assets like gold.”

The diplomatic meeting comes amid fresh U.S. export controls targeting China's AI and semiconductor sectors, raising concerns about a renewed escalation in trade friction.

Fed Rate Outlook Still in Play

Meanwhile, gold’s recent resilience is also tied to shifting expectations around the Federal Reserve’s rate trajectory. Data released last Friday showed a stronger-than-expected U.S. jobs report, complicating hopes of a rate cut as early as July. However, analysts believe the Fed may still opt for easing later this year.

“Despite robust labor data, underlying wage growth and inflationary pressure remain within manageable limits,” noted Rhona O’Connell, head of market analysis at StoneX. “This opens the door for at least one rate cut before year-end, which is supportive for gold.”

Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, thus boosting its attractiveness.

Traders currently price in a roughly 58% probability of a Fed rate cut by September, according to the CME FedWatch Tool.

Physical Demand and ETF Flows

On the physical front, gold demand in key Asian markets such as India and China has remained muted amid high prices. However, central bank buying continues to offer structural support. The People’s Bank of China, for example, reported an increase in its gold reserves for the 18th consecutive month.

Exchange-traded funds (ETFs) backed by bullion have seen renewed inflows in the past week, suggesting growing retail and institutional interest.

“ETF inflows indicate rising confidence that gold will perform well through the second half of 2025,” said Daniel Briesemann, precious metals analyst at Commerzbank. “Inflation may be cooling, but macro risks and policy uncertainty still justify a strategic allocation to gold.”

Technical Indicators

From a technical perspective, analysts see resistance near the $2,380 mark, with support holding at around $2,335.

“Gold is navigating within a consolidation band, but a decisive breakout above $2,380 could trigger a rally towards $2,400 and beyond,” said Kunal Shah, head of commodities research at Nirmal Bang. “Conversely, a break below $2,330 may signal short-term profit booking.”

The Relative Strength Index (RSI) on gold is currently at 58, suggesting the metal is not in overbought territory and could extend gains if external conditions remain favorable.

Investor Outlook

Looking ahead, investors will closely monitor macroeconomic data releases including U.S. inflation figures and producer prices due later this week. These reports could influence expectations around Fed policy and, in turn, gold’s trajectory.

With geopolitical uncertainties, a volatile dollar, and evolving central bank policies, gold’s safe-haven status is likely to remain in focus.

“Gold remains a hedge against both financial and geopolitical risks,” said Rao of Kotak. “In the near term, prices are expected to trade in the $2,330 to $2,400 range, with a bullish bias if U.S.-China tensions escalate.”