Gold futures experienced a significant drop as the United States and China reached an agreement to substantially lower tariffs, boosting risk-on sentiment in the markets. Continuous gold futures on the New York Mercantile Exchange fell by 3.6% to $3,223.80 per troy ounce during European morning trading, marking the lowest level since May 5. Despite this decline, gold remains up over 20% year to date, driven by safe haven demand amid market volatility and geopolitical conflicts.
The U.S. has reduced its reciprocal tariffs on Chinese imports from 125% to 10%, while China has similarly lowered tariffs on U.S. goods to 10% from 125%. These reductions are set to remain in place for 90 days to facilitate further discussions, according to U.S. officials. U.S. Treasury Secretary Scott Bessent, who led the U.S. trade delegation in Switzerland over the weekend, reported substantial progress in the negotiations.
In addition to the tariff reductions, the demand for gold as a safe-haven asset has been further weakened by easing geopolitical tensions. A ceasefire between India and Pakistan appears to be holding after recent border clashes, and Ukrainian President Volodymyr Zelensky has invited Russian President Vladimir Putin to meet in Turkey for talks ahead of a potential ceasefire.