Gold Tumbles and Stocks Jump as U.S.-China Tensions Ease
Last week, gold scaled fresh record highs once again, despite hawkish commentary from the Fed amid uncertainty surrounding tariffs. While this week's economic calendar was filled with Fed speaking engagements, market movement was largely driven by investor sentiment around tariffs and the U.S.-China trade war.
Monday's trading reflected a risk-off tone, as growing tensions between President Trump and Fed Chair Powell, combined with uncertainty over U.S.-China trade, fueled investor caution. By the close, the Dow Jones Industrial Average had shed 1,200 points, while the Nasdaq Composite dropped 3.7%. Meanwhile, gold hit a new record just below $3,500 before pulling back, as the dollar weakened.
On Tuesday, U.S. equities clawed back some of Monday's losses, driven by optimism about a potential de-escalation in U.S.-China trade tensions. Gold, however, declined 1% to $2,461, weighed down in part by a 0.7% gain in the dollar index. Silver remained relatively flat near $32.75.
Stocks surged on Wednesday after President Trump said he had "no intention" of firing Fed Chair Powell. Additional optimism came from Treasury Secretary Scott Beset, who hinted at a possible trade deal with China. The Nasdaq initially jumped 4% before the rally called, ending the day up 2.4%, while the Dow and S&P 500 both gained more than 1%. At the same time, gold extended its slide, falling 3% to close at $3,335. In a rare divergence, silver rose 1% to 33.39 an ounce.
Thursday marked the third straight day of gains for the S&P 500 and Nasdaq, driven by a rally in tech shares. Gold also snapped its two-day losing streak as the dollar rally lost steam and investors seized a more attractive entry point. By the close, gold was up 1.5%, while silver held steady at $33.47.
Stocks continued to climb Friday morning as investors assessed the evolving state of trade relations. Tech stocks provided an additional boost, with shares of Google parent Alphabet rising nearly 2% on upbeat earnings. Other noteworthy tech gains came from Tesla (+9%) and Nvidia (+4%). For the week, the Nasdaq led major indexes with a gain of over 6%, followed by the S&P 500 at 4%, and the Dow at 2%.
For bullion, the news wasn't as good, as U.S.-China tensions eased, and the dollar re-gained footing on its ways to its first weekly gain since March. The result was a 5.4% weekly drop for gold, at $3,289 an ounce. Silver, however, managed a modest 1% gain to end at $32.93.