Gold prices dropped on Monday, May 12, as renewed optimism over US-China trade negotiations reduced investor demand for safe-haven assets.
Spot gold declined 1.4% to $3,277.68 per ounce, while US gold futures fell 1.9% to $3,281.40 per ounce. The pullback came amid improving sentiment in global markets, prompting a shift toward riskier investments.
Investor confidence was buoyed by progress in US-China trade discussions held over the weekend in Switzerland. Officials from both countries described the talks as productive, with the US touting a deal aimed at narrowing its trade deficit and Chinese representatives citing an “important consensus.” Chinese Vice Premier He Lifeng said a joint statement was expected to be released in Geneva on Monday.
The negotiations marked a turning point in months of escalating trade tensions, which included tit-for-tat tariffs exceeding 100% on various goods and raised concerns about a potential global economic downturn.
As risk appetite increased, gold—traditionally a safe-haven during periods of economic and geopolitical instability—saw diminished demand. The strengthening US dollar further pressured the yellow metal, making it more expensive for investors holding other currencies. The dollar index rose on the back of positive trade developments, reinforcing gold’s inverse correlation to the greenback.
Market analysts anticipate that gold may remain under pressure in the short term. Jigar Trivedi, senior commodity analyst at Reliance Securities, suggested that with reduced geopolitical concerns and a stronger dollar, prices could slide further, potentially reaching $3,200 per ounce.
Traders are also eyeing key economic data due this week, particularly Tuesday’s release of the US Consumer Price Index (CPI), which could offer clues about the Federal Reserve’s interest rate outlook.
Despite short-term weakness, analysts maintain a cautious long-term view. While current conditions weigh on prices, gold remains a critical hedge against financial instability. Any signs of a dovish Fed policy shift or a resurgence in geopolitical tensions could revive investor interest in the precious metal.
