Gold prices plunge 3% as investors shift to risk assets after U.S.–China tariff deal
Gold prices dropped 3% on Monday as investors began shifting back toward risk assets such as stocks, following the announcement of a temporary tariff reduction agreement between the United States and China.
According to a Reuters report on the global gold market on Monday (May 12), gold—typically considered a safe-haven asset—fell by 3% after news of the temporary trade agreement prompted investors to move funds into higher-risk assets.
Spot gold prices declined by 3% to $3,225.28 per ounce at 1:44 p.m. Eastern Time (5:44 p.m. GMT). Gold, which had previously reached an all-time high of $3,500.05 per ounce last month due to escalating trade uncertainty, saw a sharp correction.
U.S. gold futures closed down 3.5% at $3,228 per ounce.
Bloomberg reported that spot gold steadied at $3,237.86 per ounce at 7:38 a.m. Singapore time (1 hour ahead of Thailand). The Bloomberg Dollar Spot Index held steady after a 1% rise on Monday. Meanwhile, silver, palladium, and platinum showed little change.
“The sharp reaction in gold last month to chaos coming out of the White House leaves the metal vulnerable to reversals if Trump changes course,” Adrian Ash, Director of Research at BullionVault, told Reuters.
“Market sentiment has improved now, but gold still has the potential to rise again if that sentiment deteriorates,” he added.
As part of the agreement, the U.S. will reduce tariffs on Chinese imports—imposed in April—from 145% to 30%, while China will cut tariffs on U.S. goods from 125% to 10%. These revised tariffs will be in effect for 90 days.
Following the announcement, the U.S. dollar surged to a one-month high, and global stock markets rallied. A stronger dollar makes gold more expensive for foreign investors, further pressuring gold prices.
"June gold futures buyers have lost their near-term technical advantage," said Jim Wyckoff, senior analyst at Kitco Metals. "The next upside price target is closing above solid resistance at $3,350, with initial resistance at $3,250 and then $3,275."
Investors are now awaiting the release of the U.S. Consumer Price Index (CPI) on Tuesday to gain insight into the Federal Reserve’s policy direction. Other key data due this week include the Producer Price Index (PPI) and retail sales figures.
Lower interest rates would enhance the appeal of gold, which does not yield interest, making it a more attractive investment.
Meanwhile, silver prices dropped 0.9% to $32.40 per ounce, platinum fell 1.9% to $976.06, and palladium slid 3.4% to $942.69.
