Gold Rebounds on Crude Oil Price Drop, Trump-Xi Summit Looms

Gold prices have recovered from their recent bearish trend, but the rebound is still uncertain. The precious metal started the week with a downward bias, extending its decline after reaching near $4,700 per troy ounce in August.

However, market sentiment shifted in the second half of the week due to declining crude oil prices. This decrease works against expectations of higher consumer prices, which in turn prompts the Federal Reserve (Fed) to maintain a cautious stance.

The Fed's reinforced stance led to an increase in short covering, as most traders were positioned for lower prices in anticipation of the rate hike on Wednesday. Gold longs held firm, but crowding risk rose as net speculative positioning strengthened modestly and open interest fell.

Physical gold demand diverged across Asia, with India experiencing muted buying due to high prices, while China saw stable premiums and growing demand from investors seeking a store of value and protection against market volatility.

The main focus next week will be the Trump-Xi summit on Thursday, which could trigger fresh interest in defensive assets or affirm expectations of a less confrontational global trade environment. A renewed rise in crude oil prices, firmer US Treasury yields, or a stronger dollar could trigger profit-taking and challenge the metal's recovery.