Gold Pulls Back After Hitting Record Highs, Analysts Still Bullish on $3,500 Target

Gold prices have surged recently, continuously hitting new historical highs. However, as the market holds an optimistic attitude towards the US-Japan trade negotiations, gold's record-breaking rally has temporarily come to a halt.

Spot gold prices fell by 1.8% on Thursday, dropping below $3,300 per ounce, as the initial trade talks between the US and Japan released positive signals, improving market risk sentiment. As of press time, spot gold prices were down 0.7%, at $3,319.30 per ounce.

US President Donald Trump stated that negotiators made "significant progress" in trade talks with Japanese representatives, with Japan seeking exemptions from the tariffs imposed by the US on its trading partners.

Although the negotiations have not led to an immediate halt in tariffs, Japan's chief negotiator indicated that both sides will meet again soon, striving to reach an agreement within the 90-day grace period.

Japanese Prime Minister Shigeru Ishiba responded that he will visit the US at an appropriate time for a direct meeting with Trump.

Earlier this month, the Trump administration introduced so-called reciprocal tariffs, imposing tariffs on over 180 trading partners, with specific rates proportional to the trade surplus of the targeted countries with the US. However, even countries with a trade deficit with the US were subjected to a 10% tariff.

As one of the US's key allies, Japan was not spared, being subjected to a 24% tariff.

Last week, Trump announced a 90-day suspension of reciprocal tariffs for the vast majority of countries but maintained a 10% baseline tariff.

Although gold prices pulled back during the day, Nicholas Frappell, global head of institutional markets at ABC Refinery, stated that the uncertainty surrounding Trump's tariff policies and the possibility of a global trade war would still provide solid support for gold prices.

"There are questions about the scale and scope of the tariffs, the uncertainty of the US government's strategic plans, and the extent to which US trading partners will respond," he said.

Wall Street institutions remain firmly optimistic about gold's performance this year. Citigroup Research raised its three-month gold price target from $3,200 to $3,500 per ounce on Thursday, citing increased gold purchases by Chinese insurance companies and safe-haven inflows amid tariff risks and market weakness.

Citigroup analysts stated in the report, "We believe gold is currently likely in an extremely rare state of physical shortage, which means prices need to rise to prompt holders to sell, thereby achieving market clearance."

Gold prices earlier on Thursday briefly hit a historical high of $3,357.78 per ounce and are still expected to record a gain of about 2% this week.