Gold prices fell as much as 1%, reaching around $3,220 an ounce. The metal had risen in the previous session after weak U.S. economic data increased hopes that the Federal Reserve might cut interest rates. However, traders then began to exit their positions, leading to the decline.
Progress in Trade Talks Reduces Safe-Haven Demand
Advances in U.S.-China trade negotiations have also lowered demand for gold as a safe-haven asset. The easing of tensions between the world’s two largest economies fueled a sharp rebound in risk assets this week. This development added bearish pressure on gold prices.
Christopher Wong, a foreign exchange strategist at OCBC Bank, explained that gold showed some “weakness as the tariff rollback has removed some uncertainty at least for now.” Despite this, Wong noted several factors still support gold’s appeal. These include rising protectionism, shifts in global supply chains, and ongoing questions about the U.S. dollar’s role as a reserve currency and safe haven. These elements help keep gold attractive as a portfolio hedge.
Gold Prices Still Down for the Week but Up Strongly Year-to-Date
Gold prices remain on track to fall about 3% for the week. They are now approximately $280 below the record high reached last month. Nevertheless, gold has gained more than 20% so far this year. This growth has been supported by strong demand for gold-backed exchange-traded funds, heavy buying by central banks, and speculative interest from China.
Other Precious Metals Also Weaken
As of 7:25 a.m. in London, spot gold was down 0.6% at $3,221.43 an ounce. The Bloomberg Dollar Spot Index also fell by 0.2%. Other precious metals including silver, palladium, and platinum all experienced declines.
The recent drop in gold prices reflects shifting market sentiment as trade relations improve and investors reassess risk. However, underlying concerns about global economic uncertainty continue to support gold’s role as a safe investment.
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