The gold price drops sharply as markets responded to progress in U.S.-China trade negotiations. Investors quickly moved away from safe-haven assets. Spot gold fell by 2% on Thursday, hitting a near one-month low.
By 2:00 p.m. EDT, gold traded at $3,277.17 per ounce. Earlier in the session, it dipped 2% to its lowest since May 29. Throughout the week, gold declined for the second time in a row, falling by 2.8%.
The recent gold price drops sharply because investors felt more confident. A new trade agreement between the U.S. and China calmed market fears. This deal focused on speeding up rare earth shipments to the U.S. Global stock markets rallied in response.
In the Middle East, the ceasefire between Iran and Israel remained in place. Although minor clashes occurred earlier, calm prevailed this week. This stability further reduced gold’s appeal.
Daniel Pavilonis, senior strategist at RJO Futures, noted that reduced geopolitical tensions triggered profit-taking. He explained that many had expected prolonged global conflicts, but recent diplomacy shifted that outlook.
Meanwhile, economic data showed U.S. consumer spending unexpectedly dropped in May. Early purchases made before tariff increases seemed to wear off. Inflation data also revealed moderate price increases.
Although economic news often supports gold, this time it didn’t. According to Pavilonis, the decline wasn’t due to weak data but geopolitical calm. Traders now expect the Federal Reserve to cut interest rates by 75 basis points in 2025. They believe this may start as soon as September. Still, gold remained under pressure. High interest rates usually hurt gold’s appeal. Since gold doesn’t yield interest, investors tend to favor assets that do.
Alongside the gold price drops sharply, silver slipped by 1.4% to $36.10. Platinum fell 5.3% to $1,341.57. However, both were still on track for weekly gains. Palladium rose 0.5% to $1,137.92 and marked a second consecutive week of increases. In short, the gold price drops sharply as political and economic tensions cool. Investors now look toward riskier opportunities.
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