Gold retreats as trade optimism tempers safe-haven demand

Gold prices slipped on Monday as easing global trade tensions, driven by positive developments in U.S.-China and U.S.-UK negotiations, prompted investors to rotate out of safe-haven assets and into riskier markets.

Spot gold fell 1.4% to $3,277.34 an ounce as of 04:32 GMT, while U.S. gold futures dropped 1.9% to $3,281.70. The decline follows a turbulent week in which gold initially surged nearly 6% before shedding most gains, reflecting volatile sentiment across financial markets.

Trade talks ease market anxiety

Markets responded to encouraging signals from weekend trade talks between the U.S. and China in Switzerland. U.S. officials spoke of a “deal” aimed at reducing the American trade deficit, while China’s Vice Premier He Lifeng confirmed an “important consensus” had been reached, with a joint statement expected from Geneva.

This latest round of diplomacy follows last month’s tit-for-tat tariff escalation, which had rattled markets and fueled fears of a global economic slowdown. While optimism is high, some analysts caution that the U.S. could still end up with structurally higher tariffs once the dust settles, regardless of near-term deals.

In parallel, a U.S.-UK trade agreement signed last week granted improved access for American goods and modest tariff relief for the UK on cars, steel, and aluminium. However, the deal fell short of the “full and comprehensive” framework that former President Trump had once promised.

Risk-on sentiment, dollar strength pressure gold

Investor appetite for risk has grown, further weakening demand for gold. U.S. Treasury yields climbed after stronger labor data, and with interest rate cuts now seen as less imminent, gold’s appeal as a non-yielding asset has waned.

Gold—traditionally a hedge against geopolitical and economic uncertainty—has benefited from this year’s volatility, rising over 25% and recently topping $3,500 per ounce. But with easing trade tensions and a rising dollar, analysts see limited upside in the short term.

Analysts expect gold prices to decline toward $3,200 an ounce as the dollar strengthens and geopolitical risk recedes.

Fed, inflation data in focus

Market participants are now watching Tuesday’s release of the U.S. Consumer Price Index (CPI) for fresh clues on the Fed’s policy path. Cleveland Fed President Beth Hammack recently signaled that the central bank needs more time to assess how the economy reacts to recent tariffs and political developments.