Gold Price Forecast: XAU/USD tumbles to near $4,050 on renewed optimism around US-China trade talks

• Gold price slumps to near $4,065 in Monday’s early Asian session, down 1.10% on the day. 
• Renewed optimism around US-China trade talks could undermine the safe-haven assets like Gold.  
• Markets are largely forecasting a 25 bps reduction in the Federal Funds Rate at the October meeting.

Gold price (XAU/USD) falls to around $4,065 during the early Asian session on Monday. The precious metal extends the decline as traders book profits following a prolonged record-setting rally. The meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea on Thursday will be closely watched. 

Traders move to lock in profits since gold was trading at or near all-time highs. Also, renewed optimism about US-China trade discussions and a renewed US Dollar (USD) capped safe-haven flows to gold. US Treasury Secretary Scott Bessent said on Sunday that the US and China have agreed on the framework of a potential trade deal that will be discussed when US President Donald Trump and Chinese President Xi Jinping meet later this week. 

Bessent further stated that he expects China to delay implementation of its rare earth minerals and magnets licensing regime by a year while the policy is reconsidered.

On the other hand, softer US inflation data released on Friday has reinforced the expectation of rate cuts from the US Federal Reserve (Fed). Markets are pricing in a near certainty that the Fed lowers its benchmark overnight borrowing rate by 25 basis points (bps) from its current target range of 4.0%-4.25%. 

Traders are also expecting another reduction in December. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.