Gold prices dropped by about 1% on Tuesday as easing trade tensions between the United States and its trading partners diminished the appeal of the yellow metal as a safe-haven asset. Investors are now awaiting U.S. economic data to assess the Federal Reserve's policy direction.
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Spot gold fell by 0.8% to $3,314.99 per ounce as of 04:25 GMT. U.S. gold futures dropped 0.7% to $3,325.10.
Yip Jun Rong, a market strategist at IG, said: “The risk environment has clearly improved recently, boosting market participants' optimism that the worst of the trade tensions may be behind us, amid encouraging rhetoric surrounding trade deals.”
U.S. Treasury Secretary Scott P. Bencin said on Monday that many major trading partners had made “very good” proposals to avoid U.S. tariffs, and India is likely to be among the first countries to reach an agreement.
Bencin also mentioned that China's recent move to exempt some U.S. goods from retaliatory tariffs showed a willingness to de-escalate trade tensions.
The Trump administration will also act to minimize the impact of its car tariffs by easing some duties on foreign parts in domestically manufactured vehicles.
However, there are significant risks of the global economy slipping into recession this year, according to the majority of economists in a Reuters survey, with many saying that Trump's tariffs have hurt business sentiment.
Gold's appeal, traditionally seen as a hedge against political and financial instability, soared to a record high of $3,500.05 per ounce last week due to growing uncertainty.
Investors will closely watch economic data this week, including the U.S. job openings report due later on Tuesday, personal consumption expenditures on Wednesday, and the non-farm payroll report on Friday.
Rong said: “The structural factors supporting gold prices are likely to keep the broader upward trend intact, backed by the opportunity for diversification of reserves among central banks in emerging markets.”
Spot silver dropped by 0.5% to $32.98 per ounce, platinum fell by 0.2% to $984.56, and palladium lost 0.4% to $945.47. (Agencies)
