Investing.com - Prices of safe-haven gold rebounded on Tuesday in Asia after falling below the $1,400 level as a trade truce between the U.S. and China boosted risk appetite.

The U.S. and China agreed to restart trade talks after U.S. President Donald Trump pledged to hold off on the implementation of new tariffs and also ease restrictions on tech company Huawei in order to reduce tensions with Beijing. China meanwhile agreed to make unspecified new purchases of U.S. farm products and return to the negotiating table.

Trump said negotiators from both sides are “speaking very much on the phone” and that trade meetings have already begun. “It actually began before our meeting,” Trump said, referring to his meeting with Chinese leader Xi Jinping at the G-20 summit over the weekend.

“It has to be better for us than for them because they had such a big advantage for so many years,” Trump added.

Despite the positive development, Bank of America Merrill Lynch (NYSE:BAC) and Morgan Stanley (NYSE:MS) both said they expect a stock market correction later this year.

“We still expect a 10% correction during 3Q as this past weekend’s agreement is viewed as a sell the news event,” wrote Morgan Stanley chief U.S. equity strategist Mike Wilson in a note that was cited by CNBC.

Analysts at Bank of America echoed his comment.

“The fact that there was no major breakthrough is consistent with our ‘no pain, no deal’ framework: at the moment the economy and markets are not weak enough to incentivize the US to make compromises,” noted Bank of America strategists. “We expect a deal with China, but but it could take a large market correction to get there.”

Gold prices traded lower following Trump’s announcement, but recovered slightly today.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange last traded at $1,391.95 a troy ounce by 12:12 AM ET (04:12 GMT), up 0.2%.

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