U.S.-China trade tensions ease, leading to a 1% fall in gold prices due to enhanced risk appetite.
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Gold took a nose-dive on Monday, losing over 1% of its value, primarily due to a decrease in the demand for safe-haven assets and a stronger US dollar. Let's break down the key factors that influenced Monday's market fluctuations:
1. Improved US-China Trade Talks
The activation of trade talks between the US and China escalated optimism in financial markets, lessening worries about the potential for a global recession. Reduced tension in the trade war led investors to shift away from safe assets like gold[2][5].
2. A Mightier Greenback
The US dollar gained 0.3% against a basket of currencies, resulting in gold becoming a costlier choice for international investors. This dip in demand, especially from foreign buyers, added to gold's downward trend[2][5].
3. Profit-Taking Measures
Gold had skyrocketed to an unprecedented high of $3,500.05/oz on April 22, largely driven by earlier trade worries. Monday's decline reflected a market correction as investors seized the opportunity to secure their profits amid an improved risk sentiment[2][5].
By 0220 GMT, spot gold had dropped as low as $3,272.89 per ounce after hitting a record high in April. US gold futures also dropped by 0.4% to $3,283.70 an ounce, according to Al-Rai daily[2].
Market analyst Tim Waterer from KCM Trade observed, "Financial markets, particularly riskier investments, seem more hopeful about the tariff situation compared to early April." He also noted that White House's statements about the possibility of a US-China trade agreement lessened the appeal of safe-haven assets like gold[2][5].
Experts warn of gold's sensitivity to geopolitical and economic signals. They predict that volatility could persist as long as broader stability remains elusive[4][5].
- The improved trade talks between the US and China have led investors to shift away from safe assets like gold, due to a decrease in concerns about a global recession, making gold a costlier choice for international buyers.
- The US dollar gained 0.3% against a basket of currencies, contributing to gold becoming a less attractive investment option, particularly for foreign buyers.
- Tim Waterer, a market analyst from KCM Trade, noted that financial markets, especially riskier investments like gold, seem more optimistic about the tariff situation compared to early April, due to the White House's statements about the possibility of a US-China trade agreement.
- Experts warn of gold's potential volatility, predicting that it could persist as long as broader stability remains elusive, as gold is sensitive to geopolitical and economic signals.
