Gold prices plummeted by nearly 3% on Monday as a temporary deal between the US and China to slash tariffs sent the equity and bond markets flying.Spot gold was down 2.7% to $3,237.07 per ounce by 11:30 a.m. ET, having fallen to as low as $3,208.22 earlier in the session. US gold futures also declined 2.9% to $3,245.90 per ounce.Meanwhile, the US
dollar extended gains after the trade truce, which included a sizeable reduction on the 145% levies on most Chinese imports to 30% for a period of 90 days.The announcement, a result of highly publicized negotiations between the world’s two largest economics in Geneva this weekend, represents a step toward de-escalating a tariff war that has led to significant flow into the safe-haven gold in recent weeks.“Gold’s feverish response to last month’s chaotic headlines from the White House made the precious metal vulnerable to Trump back-tracking,” Adrian Ash, director of research at BullionVault, told Reuters.“Now that the mood music is more hopeful, gold is likely to find upside potential on setbacks to this optimism.”Ahead of Monday’s selloff, investors had been scaling back exposure to gold. Hedge funds slashed their bullish wagers on the precious metal to the lowest in more than a year on growing optimism surrounding US trade negotiations, according to Commodity Futures Trading Commission data.Bullish caseStill, concerns about the economic impact of the tariff war unleashed by the new US administration have driven gold up by more than 20% this year, with prices hitting a record above $3,500 an ounce last month before losing some ground.A recent poll by Washington, D.C.-based consultancy Gallup showed that gold has surpassed stocks as the more preferred long-term investment amongst American adults.Backing gold’s case are the major US investment banks. JPMorgan recently said it sees the yellow metal rising to $4,000 in the second quarter of next year, and may even reach $6,000 in 2029 due to prolonged recession risks. Goldman Sachs also upgraded its 2025 forecast several times, with the most recent being $3,700.(With files from Bloomberg and Reuters)
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