Gold prices dropped by 1% on Friday, heading for a weekly loss, as signs of a potential U.S.-China trade breakthrough dampened demand for the safe-haven asset. Market sentiment shifted after reports that China is considering tariff exemptions on certain U.S. goods, raising hopes for a de-escalation in the prolonged trade conflict.
“Gold is struggling to maintain its upward momentum as optimism around a possible U.S.-China deal grows,” said Zain Vawda, analyst at OANDA. He added that a trade agreement could push prices down to around $3,000 per ounce or lower, depending on broader market factors.
The news also boosted the U.S. dollar, which rebounded sharply and made gold more expensive for international buyers. European equities rallied as well, reflecting broader investor confidence.
Despite this week’s decline, gold has still gained about 26% year-to-date, hitting a record high on Tuesday amid economic uncertainty and geopolitical risks.
The Federal Reserve, meanwhile, signaled no immediate need for a policy shift, choosing to monitor the impact of tariffs before taking further action. Low interest rates typically benefit gold, which does not yield interest.
Independent analyst Ross Norman noted that the current price correction could test physical demand, particularly in major markets like India. “It will be telling to see if buying picks up now that prices have pulled back,” he said.