Gold tumbles as progress in US-China trade talks offsets India-Pakistan conflict 

• Gold drops over 1%  as China and the US announced that top officials are set to meet in Switzerland this weekend to talk about trade. 
• China issued additional stimulus to support its economy, a positive for Gold..
• Gold upside trend could resume in case of increasing tensions between India and Pakistan or if trade talks fail. 

Gold (XAU/USD) drops by more than 1% on Wednesday to $3,391 at the time of writing, ahead of the Federal Reserve (Fed) rate decision and after statements from both China and the United States (US) confirmed that trade talks will kick off this weekend. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will travel later this week to Switzerland for trade talks with the Chinese delegation, led by Vice Premier He Lifeng, seeking to de-escalate a tariff standoff that has threatened to hammer both economies. In a first phase, no trade talks as such will be held, though rather talks to de-escalate the situation, according to Bessent on Fox News. 

The news comes ahead of the Federal Reserve rate decision, which is set to take place on Wednesday during the American session. According to the CME Fedwatch tool,  there is a 95.6% probability of a no-change in interest rates, so a rate cut would be a big surprise. Despite pressure from US President Donald Trump on the Fed and its Chairman Jerome Powell to cut rates, it does not look like the Fed will give in to any political demands and will keep rates steady while awaiting the impact of tariffs on the US economy and inflation. 

Daily digest market movers: Switzerland meeting offsets India-Pakistan conflict

• Gold price snaps a two-day winning streak, as signs of progress on US-China trade talks curbed demand for havens even as military hostilities between India and Pakistan escalated overnight, Bloomberg reports.
• Pakistan said it shot down five Indian airplanes and took soldiers prisoner in retaliation for Indian military strikes early on Wednesday. The prospect of a war between the nuclear-armed neighbors would typically be positive for Gold, although any added haven demand is, at this stage, being canceled out by the trade talks optimism, Bloomberg reports.
• The boss of a US-listed mining company has warned the industry to remain "disciplined" after the price of gold surged to a record high, urging executives to avoid a repeat of the mistakes, the FT reports. 

Gold Price Technical Analysis: Again talks, no deals

Wednesday's Gold price correction looks granted given that a first step has been taken with both China and the US coming to the negotiating table. However, that does not mean this is the end of the uptrend for Gold and that the precious metal will dip below $3,000 soon. The talks are in a first phase and appear to be only de-escalatory, opening up tail risks for headlines that these talks are not going smooth or could even fall apart. 

On the upside, the R1 resistance at $3,469 looks quite far away, though still could see a test if contradicting headlines emerge on the US-China talks or if the Fed meeting holds a surprise. Should some follow-through come, the R2 resistance at $3,508 will come after a fresh all-time high has been set with the break of the current one at $3,500.

On the downside, the Pivot Point at $3,396 is the first level to watch in terms of a daily close below or above the level. Further down, the daily S1 support comes in at $3,358. The technical level at $3,245 should do the trick and hold in case of any sudden reversals if the S2 support at $3,285 does not prove to be strong enough.

XAU/USD: Daily Chart