Gold prices declined on Monday as easing geopolitical tensions and renewed optimism over US-China trade negotiations reduced investor demand for safe-haven assets.
Spot gold fell as much as 1.8% in early Asian trading to approximately $3,265 an ounce before stabilising at $3,286.65 as of 7:41 a.m. in Singapore.
The decline follows indications of “substantial progress” in trade discussions between the United States and China in the last two days in Switzerland.
The development led to a slight strengthening of the US dollar as the Bloomberg Dollar Spot Index rose 0.1%, making gold more expensive for holders of other currencies and contributing to the metal’s downturn.
Nick Twidale, Chief Market Analyst at AT Global Markets, stated that gold may test lower levels if further trade progress emerges.
“We need to see concrete details in the next few sessions and then we can get an idea of how much of a pullback we see in gold,” he said.
Twidale added that prices could decline toward the $3,100 level in the short term.
Despite the current weakness, analysts expect support to hold near $3,200. Robert Rennie, Head of Commodity and Carbon Research at Westpac Banking Corp., noted that any dip below that threshold is likely to attract renewed buying interest.
“Dips to and through $3,200 in gold should be very well supported for an eventual move to fresh record highs,” he said.
The current pullback also coincides with reduced speculative interest as Hedge funds scaled back bullish positions on gold to the lowest levels in more than a year, according to data from the Commodity Futures Trading Commission (CFTC).
This shift reflects a broader decline in risk aversion as markets digest positive trade developments and a tentative ceasefire between India and Pakistan.
Investors are closely monitoring diplomatic efforts between Ukraine and Russia as Ukrainian President Volodymyr Zelenskiy seeks direct engagement with Russian President Vladimir Putin.
Gold remains up roughly 25% year-to-date after rising above $3,500 an ounce in April.
Analysts attribute the broader rally to central bank purchases, Chinese retail demand and ongoing concerns about global monetary policy tightening and economic uncertainty.
