Gold prices extended their retreat on Tuesday, falling below the key $3,300 per troy ounce level, as a growing price discount in Shanghai outweighed bullish sentiment from New York’s Comex market following a long holiday weekend.
Traders returning to the London bullion market and Comex futures saw gold dip to $3,288 per ounce, down 1.6% from last Friday’s record high. The decline marked a significant pullback from April’s historic $3,500 peak, driven in part by easing geopolitical tensions and market reaction to U.S. trade developments.
Global equities and Western government bonds rose simultaneously, lowering borrowing costs and diminishing gold’s appeal as a safe haven. The retreat came after U.S. President Donald Trump delayed the implementation of steep 50% tariffs on European exports, extending trade negotiations and injecting short-term optimism into financial markets.
“Continued uncertainty over U.S. policy has provided support in recent weeks,” said Rhona O’Connell, chief precious metals analyst at StoneX. “However, Trump’s abrupt shift on the EU tariffs over the weekend has reversed some of that momentum.”
Shanghai Discount Weighs on Prices
A key pressure point on global gold prices emerged from China, the world’s largest gold consumer, miner, and central bank buyer. For the first time in over two months, gold in Shanghai was priced below international quotes, signaling a cooling in local demand.
On Tuesday, Shanghai gold fell for the third consecutive session to ¥768 per gram, translating to a $1.50 per ounce discount compared to London quotes. This rare development follows a period of strong Chinese buying, which had driven Shanghai premiums to 19-month highs above $60 per ounce in April.
That surge in demand was reflected in Hong Kong trade data, which showed China’s total gold imports in April jumped nearly 75%, with net imports via Hong Kong increasing nearly ninefold month-on-month to a 13-month high.
“Trade data reinforces anecdotal evidence of a resurgence in Chinese demand,” O’Connell noted, even as broader concerns persist about the sustainability of retail buying amid historically high prices.
Still, the World Gold Council reported that China’s net gold imports for the first quarter of 2025 dropped over 85% year-on-year, marking the lowest quarterly total since 2021. Jewelry demand has weakened under pressure from elevated prices, with retail bar and coin purchases overtaking it for the first time in modern records.
India Demand Also Slows
India, another major gold consumer with no domestic mine production, also showed signs of demand erosion. According to Metals Focus, gold imports fell over 20% year-on-year by weight last month.
“Prices were falling and buyers returned to the market,” said a New Delhi jeweler. “But now that prices have rebounded, buyers are stepping back again.” Domestic dealers are reportedly offering discounts of nearly $50 per ounce compared to the official landed cost of new bullion after accounting for import duty and sales tax.
Speculative Betting Rises on Comex
Despite the global pullback, speculative interest in U.S. gold futures has intensified. Commodity Futures Trading Commission (CFTC) data released Friday showed hedge funds and managed money accounts increasing their net long positions on Comex gold by 7.0%, marking the first uptick in nearly two months. The move came as gold touched new highs, peaking at $3,500 per ounce.
Currency Movements and Broader Market Dynamics
The U.S. Dollar Index (DXY) rebounded on Tuesday, gaining 0.7%, and firming against both the Chinese yuan and major Western currencies. The yuan, which had touched a 29-week high against the dollar during Monday’s holiday-thinned session, weakened 0.4%.
The dollar’s strength helped moderate the gold price decline for investors outside the United States. However, the UK gold price in pounds fell to a one-week low beneath £2,430 per ounce, while gold priced in euros dropped below €2,900.
Looking Ahead
Market watchers are closely monitoring both geopolitical developments and macroeconomic policy shifts. A report from Reuters suggested that Japan may cut new issuance of long-dated government bonds in an effort to stabilize the market for Japanese Government Bonds (JGBs), further reflecting the fragile sentiment in global fixed-income markets.
As volatility persists, traders and investors remain divided over gold’s next move. While fundamental support from central bank buying and geopolitical uncertainty remains, the recent price discount in Shanghai suggests that Asian physical demand—often a pillar of the market—is under near-term strain.
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