Trade-War Thaw Triggers Risk-On Surge: Gold Plunges 3.1%, S&P Futures Leap 1.1%

— But Is the Relief Rally Built to Last?

Gold crashed 3.1% to $3,985/oz in overnight trading, while S&P 500 futures vaulted 1.1% and Nasdaq futures soared 1.4% as investors pile into risk assets ahead of tomorrow’s Trump-Xi summit in Seoul.

The sell-off in bullion—down $126 in 24 hours—erases half the safe-haven premium built during October’s tariff panic, when gold spiked to a 2025 record $4,371 on fears of Nov 1 tariff activation and rare-earth export bans.

With a “framework truce” reportedly pre-cleared, markets are laser-focused on three make-or-break questions:

1. Will Tomorrow’s U.S.-China Meeting Go Well?

Probability of a Positive Outcome: 74% (Up from 48% Oct 20)

Bull Case (58% Base Case)

• 90-day tariff freeze (Nov 1 deadline suspended)

• China pledges 22M metric tons of U.S. soybeans for 2026

• Rare-earth export permits fast-tracked for U.S. allies

• Joint statement on fentanyl precursors and Taiwan overflight de-escalation

“Trump needs a stock-market win before midterms; Xi needs export oxygen before 2026 Party Congress. The math aligns.” — Former USTR Deputy

Bear Case (16% Risk)

• Trump demands TikTok sale by Dec 31 → Xi exits

• USTR leaks Phase One non-compliance findings mid-photo-op

• South Korea pushes trilateral chip pact → talks collapse

Wildcard (10%)

• Last-minute U.S. Treasury currency-manipulator label

Verdict: High odds of a handshake and 90-day pause. A full Phase Two accord is unrealistic, but a ceasefire communiqué is nearly locked.

2. Could It Continue to Boost the Broader Market?

Short Answer: YES — With a 3–5% Near-Term Pop, Then Fade

Key Levels to Watch

• S&P 6,300 = Melt-up confirmation

• VIX < 14 = Sustained calm (currently 16.9)

• USD/CNY < 7.02 = China funding U.S. ag purchases

Risks to the Rally

1. “Sell the news” post-handshake — profit-taking by Nov 4

2. Earnings collision — MSFT, GOOGL, AMZN this week; China warnings cap gains

3. Fed (Oct 30) — hawkish dot-plot surprise

Verdict: Lock in 3–5% gains by Friday, then fade above S&P 6,300 unless China PMI (Oct 31) > 50.8.

3. Gold Is Crashing — Bottom-Fish or Exit?

Current Price: $3,985 | 200-DMA: $3,420 | Fair Value (Inflation-Adjusted): ~$3,600

Technical View

RSI (14): 38 → Oversold (was 72 overbought Oct 20)

Support: $3,900 (50-DMA) → $3,800 (psychological)

Resistance: $4,050 → $4,100 (Oct 25 close)

• Volume surge on downside = macro-tourist capitulation

• Death cross avoided — 50-DMA still above 200-DMA

Fundamental View

Positioning

• CFTC (Oct 25): Spec long = 312K contracts (near record)

• ETF flows: –$2.4B outflow last 48h — forced de-leveraging

“The trade-war fear premium is evaporating. Gold’s drop is orderly, not terminal—but the easy money is gone.” — Head of Commodity Strategy, Independent Research

Bottom Line

The Trump-Xi meeting is now the most important geopolitical event for markets since the 2020 Phase One deal.

• A handshake and pause = risk-on rally, potential year-end melt-up.

• A walkout or delay = sharp correction, renewed safe-haven bid.

Investors are positioned long risk but with tight stops. Hedge funds have increased VIX call buying and gold exposure as insurance.

As one strategist put it:

“This isn’t just about tariffs anymore. It’s about whether the world’s two largest economies can avoid a full economic decoupling—at least for now.” — Goldman Sachs, Oct 27, 2025

We’ll know by Thursday night whether the truce holds—or if the trade war enters its most dangerous phase yet.

Play the pop. Protect the downside.