Gold’s role amid US-China trade developments: A strategic perspective
17 November, 2025
Recently, I joined Asharq Business on Bloomberg TV to discuss the latest developments in the anticipated US-China trade agreement and its impact on gold within the financial landscape. While headlines often highlight short-term market reactions, a deeper analysis shows that gold’s status as a safe haven remains robust – driven by structural forces that go well beyond the immediate effects of trade negotiations.
Progress in US-China talks typically encourages investors to shift from traditional safe havens like gold into risk assets such as equities and credit. This rotation reflects improved risk sentiment and a temporary reduction in perceived global uncertainty. However, it’s important to recognise that gold’s fundamental appeal as a safe haven is not solely tied to the ups and downs of bilateral trade relations. Instead, gold’s strategic value is anchored in broader, persistent factors: elevated global debt levels, ongoing monetary policy experimentation, and the diversification needs of both institutional and central bank investors in major markets.
Recent price movements in gold – including short-term declines following positive trade headlines – should be seen as a normal feature of healthy, functioning markets. Rather than questioning whether such moves are “justified,” investors are better served by focusing on the underlying drivers – government debt, persistent inflation risks, and policy uncertainty – that continue to support gold’s long-term role as a portfolio diversifier and store of value. Central banks, in particular, have demonstrated an unwavering commitment to gold, steadily increasing their allocations as part of a broader strategy to mitigate sovereign and currency-specific risks.
A key question for many market participants is whether a US-China trade deal might accelerate or slow the role the dollar plays in broader trade relations. While a trade agreement may ease tariff tensions and improve market access, it does not address the deeper, strategic motivations behind central banks’ diversification beyond the US dollar. Performance in time of crisis, debt exposure, and the desire for a more balanced reserve asset mix are long-term structural factors that will persist regardless of incremental progress in trade relations. As such, gold’s supportive trend from greater asset diversification remains intact, with central banks likely to continue accumulating gold as a neutral, non-sovereign asset.
For investors assessing the impact on gold in the wake of a trade deal, several key indicators warrant close attention. Real yields remain the most important signal: falling real yields typically boost gold, while rising yields can exert downward pressure. The direction of the US dollar is another critical factor, as a stronger dollar often limits gold’s near-term upside. Geoeconomic risk is still top of mind, and bilaterial agreements are not currently seen as long-term solutions for investors. Additionally, trends in ETF and physical gold flows, as well as ongoing central bank purchases, provide valuable insight into investor confidence in gold’s enduring role. Finally, for regional investors – especially those in the Gulf – current conditions of high global debt and policy uncertainty reinforce the need for safe-haven assets. Gold continues to offer diversification and liquidity benefits. Rather than reacting to short-term market moves, investors should focus on fundamentals and view any dips as opportunities to reassess and strengthen their portfolios for the long term.
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