On a day when Indian equity benchmark indices registered some of their strongest gains in recent months, global gold prices witnessed a sharp decline of nearly 3.5%, falling by over $100 per ounce to settle near the $3,233 level on Comex—the global benchmark for gold. In the Indian market, gold prices dropped by approximately ₹3,740 per 10 grams, reaching ₹95,930. This comes after the yellow metal had crossed the ₹1 lakh mark last month amid geopolitical uncertainty and heightened tariff tensions.

Monday’s decline is among the steepest in recent times and is being attributed to a shift in investor sentiment driven by improving global trade dynamics. Specifically, progress in trade negotiations between the United States and China triggered a move away from safe-haven assets such as gold, towards riskier assets like equities.

According to Reuters, spot gold prices fell 3% to $3,225.28 per ounce by 1:44 p.m. Eastern Time (5:44 p.m. GMT), while US gold futures settled 3.5% lower at $3,228. Earlier, gold had surged to an all-time high of $3,500.05 per ounce last month during heightened trade uncertainties.

Bloomberg reported that spot gold steadied at $3,237.86 per ounce in early Tuesday trading in Asia. The Bloomberg Dollar Spot Index remained firm after a 1% increase on Monday, reflecting strengthening demand for the US dollar, which typically makes gold more expensive for non-dollar investors.

In the Indian context, easing Indo-Pakistan tensions also played a role in weakening gold demand, traders noted. Over the past week, gold prices had remained relatively range-bound, fluctuating by 1-2% daily. However, the latest correction marks a significant deviation from that trend.

The tariff agreement between the US and China involves substantial temporary reductions: US tariffs on Chinese goods, originally hiked to 145% in April, will be cut to 30%, while China will reduce its tariffs on American goods from 125% to 10%. These terms will remain in place for 90 days, contributing to a buoyant mood in equity markets and a stronger US dollar.

Commenting on the market volatility, Adrian Ash, Director of Research at BullionVault, stated, “The sharp reaction in gold last month to chaos coming out of the White House leaves the metal vulnerable to reversals if Trump changes course. Market sentiment has improved now, but gold still has the potential to rise again if that sentiment deteriorates.”

Jim Wyckoff, senior analyst at Kitco Metals, added that June gold futures buyers had lost their near-term technical edge, identifying $3,250 and $3,275 as the next key resistance levels, with a breakout above $3,350 needed to regain bullish momentum.

Traders are now closely watching Tuesday’s US Consumer Price Index (CPI) release, along with upcoming data on the Producer Price Index (PPI) and retail sales, to assess the Federal Reserve’s next policy moves. Lower interest rates typically increase gold’s appeal, as the metal does not yield interest.

Other precious metals also saw modest declines: silver dropped 0.9% to $32.40 per ounce, platinum slipped 1.9% to $976.06, and palladium fell 3.4% to $942.69.