Gold prices continued to tumble on Monday, reaching a fresh one-week low below $3,250, driven by news of significant progress in the U.S.–China trade talks. This shift in market sentiment came after both countries announced a new deal to reduce tariffs, encouraging investors to move away from safe-haven assets like gold.
Trade Deal Between U.S. and China
One of the main factors behind the drop in gold prices was the announcement of a 90-day pause in imposing new tariffs between the U.S. and China, along with a temporary reduction of existing tariffs. The agreement, described as a major breakthrough, was seen as a catalyst for increased market confidence, resulting in less demand for gold.
The U.S. government has also decided to lower the reciprocal tariffs imposed under President Trump’s administration from 25% to 10%, with a further 20% reduction on tariffs concerning fentanyl-related issues. The agreement, confirmed after intensive trade discussions over the weekend, aims to reduce tensions between the two global economic giants and could pave the way for more talks on critical trade issues.
U.S. Treasury Secretary Scott Bessent emphasized that both nations were no longer focused on “decoupling,” and a more stable mechanism for addressing trade concerns was in place. The agreement is only temporary, but it marks an important step in easing tensions. Additional rounds of negotiations are anticipated on various economic matters.
Shift in Investor Sentiment: Gold Faces Pressure
Following the announcement of the trade agreement, gold futures dropped by over $120 per ounce as traders abandoned safe-haven assets in favor of riskier investments. This shift was also accompanied by a stronger U.S. dollar, which typically exerts downward pressure on the price of gold due to the inverse relationship between the two.
U.S. stock futures surged in response to the positive developments in the trade talks, while China’s Vice Premier He Lifeng further confirmed that a joint declaration would be issued in Geneva, reinforcing the market’s optimism. As a result, gold saw a significant retreat from its recent highs.
Geopolitical Developments Provide Further Relief to Markets
Elsewhere, developments in Russia and Ukraine provided further signs of stabilization in global markets. Russian President Vladimir Putin announced his willingness to negotiate directly with Ukrainian President Volodymyr Zelenskyy without any preconditions, signaling a potential breakthrough in the ongoing conflict. Meanwhile, Hamas indicated that Edan Alexander, the last surviving American hostage, would be released. The group also mentioned plans to engage directly with the U.S. to discuss a ceasefire and the resumption of humanitarian aid. These positive geopolitical signals contributed to the growing sense of stability and further reduced the demand for gold.
Market Focus on U.S. Inflation Data and Federal Reserve Outlook
Looking ahead, traders are closely monitoring the upcoming release of U.S. inflation data, which could influence market trends and gold’s price trajectory. Additionally, all eyes are on Federal Reserve Chair Jerome Powell’s speech later this week, as investors hope to hear clues regarding future interest rate decisions and the broader economic outlook. Any comments from Powell on monetary policy could have a significant impact on gold prices, particularly if the inflation data shows signs of cooling.
Gold’s Technical Picture and Support Levels
From a technical perspective, gold remains under strong bearish pressure, with prices struggling to maintain support below the $3,250 mark. This price level coincides with a key confluence zone that includes the 100-period Exponential Moving Average (EMA) on the 4-hour chart and the 61.8% Fibonacci retracement of the recent upward move. As such, this area represents a strong resistance level for gold.
Further bearish signals are evident on the hourly chart, indicating that additional downside movement is likely. The $3,200 per ounce level remains a crucial support area for bullish traders, as a recovery above this level could signal a potential rebound. If prices manage to surpass the $3,500 threshold, which was an all-time high in April, gold could regain upward momentum.
However, any attempt to recover toward the $3,300 range is likely to face significant selling pressure, particularly in the $3,317–$3,318 price zone, which corresponds with a recent peak during the Asian trading session.
Conclusion: Gold’s Outlook in the Current Environment
In conclusion, the decline in gold prices is largely attributed to the positive developments in U.S.-China trade talks and the subsequent optimism in global markets. With significant resistance around the $3,250 level, gold is facing substantial challenges in regaining upward momentum. The precious metal’s future price action will largely depend on the geopolitical landscape, economic data, and any monetary policy signals from the Federal Reserve.
