Gold prices slipped amid easing trade tensions and a stronger US dollar, reducing demand for the safe-haven metal.

Gold Loses Shine as US-China Trade Progress Spurs Risk Appetite

In a surprising turn, gold prices slipped on Monday, May 12, as optimism over renewed US-China trade negotiations steered investors away from traditional safe-haven assets. The drop comes after months of geopolitical uncertainty had bolstered the precious metal’s value. But with talks between Washington and Beijing ending on a positive note, the market’s mood shifted—quickly and decisively.

According to the latest data, spot gold fell by 1.4%, landing at $3,277.68 per ounce. US gold futures mirrored the slide, declining 1.9% to settle at $3,281.40 per ounce. In India, where gold remains a crucial part of cultural and investment portfolios, prices dropped to ₹9,688 per gram for 24-karat gold and ₹8,880 for 22-karat, signaling a global trend of cooling enthusiasm.

US-China Trade Talks Calm Market Jitters

At the heart of the gold slump is a cautiously optimistic development in Switzerland, where high-level delegations from the United States and China met to hash out trade terms. The meetings, held over the weekend, concluded with both sides signaling progress. Chinese Vice Premier He Lifeng mentioned a forthcoming joint statement, underscoring that “important consensus” had been reached.

American officials, meanwhile, painted the negotiations as a step toward addressing the US trade deficit. The shift in tone was a sharp contrast to the previous months of tension, where tit-for-tat tariffs exceeding 100% sparked global recession fears and drove investors toward gold and other low-risk assets.

As risk appetite returns, demand for gold—a traditional safe haven in turbulent times—naturally recedes.

Dollar Strength Adds Downward Pressure

The strengthening of the US dollar added another layer to gold’s decline. As the dollar gained momentum, buoyed by improved trade sentiment, gold became less appealing to investors holding foreign currencies. Historically, gold and the dollar have shared an inverse relationship: when the greenback gains ground, gold tends to lose some of its luster.

The US Dollar Index, which measures the currency’s strength against a basket of global peers, edged higher Monday. This rise not only eroded gold’s appeal but also signaled that investors were regaining confidence in broader economic stability—at least for now.

Short-Term Dip, Long-Term Questions

What does this mean for investors? According to Jigar Trivedi, a senior commodity analyst at Reliance Securities, gold could face continued downward pressure if current trends hold. “With geopolitical risk receding and the dollar firming up, we may see gold test lower levels—potentially dipping toward $3,200 per ounce in the short term,” he noted.

However, Trivedi also acknowledged the unpredictability of global markets. Much depends on the upcoming release of the US Consumer Price Index (CPI), due Tuesday. If inflation cools faster than expected, or if the Federal Reserve adopts a dovish monetary stance, gold could see renewed interest from investors hedging against long-term volatility.

Mixed Signals Ahead for Investors

Despite the current dip, gold’s long-term appeal hasn’t entirely diminished. Analysts remain divided. Some suggest the metal may regain favor if geopolitical risks reemerge or if economic headwinds persist. Historically, gold has served as a robust hedge during periods of inflation, central bank uncertainty, or global conflict.

In fact, according to a 2024 World Gold Council report, central banks increased their gold holdings by nearly 1,000 tonnes last year, a testament to gold’s enduring role in preserving value during unstable times.

The Bottom Line

While Monday’s price dip reflects short-term sentiment driven by trade optimism and dollar strength, gold’s role as a strategic asset hasn’t disappeared. Investors would do well to monitor macroeconomic signals closely—particularly US inflation data and future Fed policy shifts.

The road ahead may be choppy, but for those with a long view, gold still holds its place as a resilient counterweight in a diversified portfolio.

Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Investors should consult a certified financial advisor before making investment decisions.

source : CNBCTV18