Gold prices dropped sharply on Thursday, retreating nearly 2% and touching a near one-month low, as improving geopolitical sentiment and a fresh trade agreement between the U.S. and China dampened the metal’s traditional role as a safe-haven asset.
Spot gold declined by 1.7% to $3,271.59 per ounce by 11:30 a.m. EDT, after earlier hitting its lowest point since May 29. U.S. gold futures also dropped, falling 1.9% to $3,283.30. This marks the second consecutive weekly loss for the yellow metal, with prices down 2.8% so far this week.
Analysts attributed the downturn to waning geopolitical tensions and an uptick in investor risk appetite. Daniel Pavilonis, senior market strategist at RJO Futures, noted, “The recent slowdown in geopolitical risks has prompted investors to take profits, especially as fears of a broader conflict involving China or the Middle East begin to fade.”
Market sentiment was buoyed by Thursday’s announcement of a trade agreement between the U.S. and China aimed at expediting rare earth mineral shipments to America. The deal was seen as a sign of improving ties between the two economic giants, sparking a rally in global equities.
In the Middle East, a ceasefire between Iran and Israel has remained intact despite minor clashes earlier in the week, further contributing to a more stable geopolitical backdrop.
Economic data from the U.S. also weighed on gold. Consumer spending unexpectedly fell in May, as an earlier surge in purchases—especially in sectors like automobiles, spurred by tariff concerns—waned. Inflation rose moderately during the month, reinforcing expectations that the Federal Reserve may begin cutting interest rates later this year. Traders are now pricing in a potential 75 basis point reduction in interest rates by the end of 2025, possibly starting in September.
Despite the supportive inflation outlook, gold prices remained under pressure as investors shifted toward riskier assets. “The economic data isn’t having much of an impact right now; the main driver is the geopolitical easing,” added Pavilonis.
Other precious metals saw mixed movements. Spot silver dropped 1.4% to $36.11 per ounce, and platinum plunged 5.3% to $1,341.98. However, both were still poised for a weekly gain. Palladium edged up by 0.1% to $1,132.65, marking its second straight week of advances.
As global tensions ease and economic indicators point toward stability, gold’s shine as a hedge against uncertainty may continue to dim in the near term.