Gold prices experienced a noticeable decline during trading on Monday, following positive developments in trade talks between the United States and China, which were described as constructive and helped ease market fears. This development prompted investors to reduce their investments in safe-haven assets and shift towards investments considered riskier.
Gold Prices Performance:
The spot gold price dropped by 3% to $3,223.34 per ounce at the time of writing this report. Additionally, U.S. gold futures saw a sharp decline of 3.4%, reaching $3,2120.70 per ounce.
Other precious metals also showed poor performance, with silver falling by 1.51% and platinum by 1.55%.
Factors Influencing Gold Prices:
The United States and China concluded trade talks that were described as positive and constructive on Sunday, where U.S. officials praised an “agreement” to reduce the trade deficit, while Chinese officials mentioned reaching a “significant consensus.” These statements helped allay fears regarding the ongoing trade war between the two countries, thereby reducing the appeal of gold as a safe haven.
At the same time, the dollar has risen significantly, negatively impacting gold as the USD/JPY currency pair has seen a notable increase of nearly 1.5% during today's trading, reaching a level of 147.50, amidst a broad rise of the dollar against most major currencies.
Additionally, the EUR/USD pair has declined by more than 1%, reaching 1.1120, while the GBP/USD pair decreased by 0.8%, testing levels below 1.3200.
These movements coincide with the rise in futures for the S&P 500 index, which are close to achieving gains of 3%.
This significant shift in the markets is attributed to the joint statement issued by the United States and China, in which both parties confirmed the reduction of mutual retaliatory tariffs by 115%. Despite this reduction, the United States will still impose overall tariffs of 30% on China, while China will impose basic tariffs of 10% on the United States.
As fears about trade tensions recede, investors have shifted towards riskier and higher-yielding assets, such as stocks, which has decreased the demand for gold as a safe haven, contributing to U.S. stock futures rising by over 2%.
Earlier, the President of the Federal Reserve Bank of Cleveland stated that the central bank needs more time to assess the impact of tariffs and other Trump policies on the economy before determining an appropriate response, adding a sense of caution in the markets.
Future Expectations:
Analysts expect gold prices to continue declining in the short term due to the rising value of the dollar and decreasing geopolitical risks, potentially pushing the yellow metal to levels of $3,200 per ounce.
