Gold prices fell sharply on Monday as easing tensions between the U.S. and China reduced demand for safe-haven assets. Following a joint agreement to lower tariffs for 90 days — a move seen as a major step in de-escalating the trade war — gold dropped by as much as 3.5% to around $3,228 an ounce.
Markets responded positively after both sides announced plans to reduce U.S. tariffs on Chinese imports from 145% to 30%, and Chinese duties on U.S. goods from 125% to 10%. This progress spurred a stronger dollar, making gold more expensive and less attractive to investors.
Before the drop, hedge funds had already scaled back their bullish gold positions amid optimism over trade talks. Analysts believe that if trade negotiations continue improving, gold may test support near $3,200/oz. However, strong buying from central banks and Chinese retail investors could limit further losses.
Reduced geopolitical risks also weakened gold’s appeal. A ceasefire between India and Pakistan appeared to be holding, and U.S. efforts to broker peace in Ukraine were entering a critical phase. Investors now await U.S. inflation data for clues on future Federal Reserve policy, as higher interest rates could further pressure gold prices.