Gold prices fell for the second time in three sessions as investors assessed April’s U.S. inflation data, which came in weaker than expected, alongside a cooling in trade tensions between the United States and China.
The yellow metal dropped by as much as 0.9% before trimming some of its losses, following reports of discussions between the U.S. and South Korea regarding monetary policy, which also contributed to a weaker dollar. Earlier this week, gold faced sharp selling pressure after a temporary truce was announced in trade talks between Washington and Beijing, prompting investors to shift capital away from traditional safe havens.
Economists noted that the tariff levels agreed upon between the U.S. and China were significantly lower than anticipated, easing concerns over potential threats to global economic growth. They added that defensive sectors, including gold, are likely to see capital outflows as investor sentiment shifts toward riskier assets.
Progress made during a weekend meeting in Switzerland helped revive risk appetite, sparking a broad market rally that erased the S&P 500’s year-to-date losses.
Despite the recent pullback, gold remains up roughly 20% year-to-date, having surged past a record high of $3,500 per ounce last month amid intensifying trade tensions. At the time, investors feared that the standoff could lead to economic slowdown or even recession, along with rising inflation.
April inflation data in the U.S. came in below expectations, suggesting that companies remain hesitant to pass on elevated tariff costs to consumers. This has increased speculation that the Federal Reserve may move to cut interest rates later this year — a factor that enhances gold’s appeal as a non-yielding asset.
