Gold drops as US-China tariff reduction weighs on safe-haven demand

LONDON (May 12) Gold prices are under significant pressure in Monday’s session, weighed down by improving global risk sentiment and a strengthening US Dollar (USD). 

At the time of writing, XAU/USD is trading around $3,217 per ounce, marking a decline of over 3% from the previous session as safe-haven demand fades. 

The drop comes after the announcement of a 90-day trade agreement between the United States and China to cut the level of tariffs they apply to each other’s goods, which has helped ease geopolitical tensions and spurred gains in equities and the US Dollar, reducing Gold’s appeal.

Gold Slides on US-China trade agreement, strong Dollar ahead of CPI release

Adding further downside pressure, the US Dollar Index (DXY) trades above 100.60, making Gold more expensive for non-dollar holders and further dampening demand. 

Additionally, geopolitical developments, including a ceasefire between India and Pakistan and ongoing Russia-Ukraine negotiations, have reduced risk aversion, contributing to outflows from Gold. 

Market participants are also awaiting this Tuesday’s US Consumer Price Index (CPI) release, a key data point that could influence future Federal Reserve (Fed) policy decisions, and by extension, the Gold price.

FXStreet