Gold prices plunged by 3% on Monday as investors turned to riskier assets such as stocks, following the announcement of a temporary trade deal between the United States and China. The deal, which included a reduction in tariffs, prompted a shift in market sentiment, weighing heavily on the precious metal.
Spot gold prices dropped to $3,225.28 per ounce by 1:44 p.m. Eastern Time (5:44 p.m. GMT), marking a sharp correction from the all-time high of $3,500.05 per ounce reached last month amidst growing trade tensions. U.S. gold futures fell by 3.5%, closing at $3,228 per ounce.
As reported by Bloomberg, spot gold steadied at $3,237.86 per ounce at 7:38 a.m. Singapore time. The Bloomberg Dollar Spot Index, which had risen by 1% earlier on Monday, remained steady, adding further pressure on gold. Meanwhile, other precious metals, including silver, palladium, and platinum, saw little change.
Adrian Ash, Director of Research at BullionVault, told Reuters, “The sharp reaction in gold last month to chaos coming out of the White House leaves the metal vulnerable to reversals if Trump changes course.” However, he added that while market sentiment has improved, gold still has the potential to rise again if conditions worsen.
Under the terms of the agreement, the U.S. will reduce tariffs on Chinese imports from 145% to 30%, while China will cut tariffs on U.S. goods from 125% to 10%. These revised tariffs will be in effect for 90 days.
The tariff reduction deal fueled optimism in global markets, with the U.S. dollar surging to a one-month high and stock markets rallying. A stronger dollar makes gold more expensive for foreign investors, contributing to the pressure on gold prices.
Jim Wyckoff, senior analyst at Kitco Metals, noted, “June gold futures buyers have lost their near-term technical advantage,” and pointed out that the next upside target for gold would be breaking solid resistance at $3,350, with initial resistance at $3,250 and then $3,275.
Investors are now awaiting the release of the U.S. Consumer Price Index (CPI) on Tuesday for insights into the Federal Reserve’s policy direction. Key economic data, including the Producer Price Index (PPI) and retail sales figures, will also be in focus throughout the week. A potential reduction in interest rates would likely enhance gold’s appeal, as lower rates make the non-yielding asset more attractive to investors.
In the broader precious metals market, silver dropped by 0.9% to $32.40 per ounce, platinum fell 1.9% to $976.06, and palladium slid 3.4% to $942.69.
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