Investing.com -- Gold prices fell sharply Monday, as investors left safe havens in favor of more risk-driven assets after the U.S. and China reached a trade deal, easing concerns about a global recession.
At 08:55 ET (12:55 GMT), spot gold slid 2.9% to $3,229.54 an ounce, while gold futures for June fell 3.4% to $3,231.04/oz by 20:12 ET (00:12 GMT).
Easing geopolitical tensions also sapped demand for gold, as a weekend ceasefire between nuclear armed neighbors India and Pakistan appeared to be holding.
Gold slides as US touts China trade deal
Weakness in gold came after the U.S. and China agreed to a 90-day pause to soaring tariffs placed on each other and will temporarily lower their respective levies.
Washington has agreed to cut U.S. President Donald Trump’s so-called "reciprocal" tariffs on China to 10%, while a 20% tariff related to Beijing’s alleged role in the flow of the illegal drug fentanyl remains in force. Meanwhile, China’s duties on U.S. imports are being cut to 10%, the nations said in a rare joint statement following high-stakes trade talks over the weekend.
More negotiations are planned between the two sides, while both sides may conduct working-level consultations on relevant economic and trade issues, the countries said.
A trade deal heralds a deescalation in U.S.-China trade tensions, which rose substantially in the past month after Washington and Beijing engaged in a bitter tariff exchange. Trump slapped China with 145% trade tariffs, to which Beijing retaliated with a 125% levy.
The prospect of a U.S.-China deescalation sapped demand for gold, which had benefited greatly from heightened safe haven flows in the past month - pushing gold to a record high of $3,500/oz.
Easing Indo-Pak tensions dent haven demand
Gold was also pressured by softer haven demand in the face of easing tensions between India and Pakistan, as a U.S.-brokered ceasefire signed over the weekend now appeared to be holding.
While both New Delhi and Islamabad had initially accused each other of violating the ceasefire on Saturday, military action in the Kashmir region and along the Indo-Pak border appeared to be tapering off, at least over the past 36 hours.
Focus was now on the U.S.’ offer to mediate over the disputed territory of Kashmir- an offer that was welcomed by Pakistan but not acknowledged by India.
"Still, gold is up by more than 20% so far this year, with Trump’s unpredictable trade policy the key driver for gold so far in 2025," said analysts at ING, in a note.
Other precious metal prices were also hit hard, with platinum futures fell 2.3% to $978.90/oz, while silver futures fell 1.4% to $32.480/oz.
Industrial metals face uncertain future
Industrial metals, specifically copper, traded in a mixed fashion Monday, as investors weighed up the prospect of fewer economic headwinds for top importer China, but also coped with a stronger dollar.
Benchmark copper futures on the London Metal Exchange rose 0.9% to $9,529.00 a ton, while U.S. copper futures fell 0.4% to $4.6348 a pound.
The trade deal marks a substantial cooling of trade tensions between the US and China, noted analysts at ING, but questions remain for markets as to what the end game will be, as the measure will be operational for 90 days, and what the eventual level of tariffs will be.
"Uncertainty is still high, and volatility is likely to remain elevated across commodities markets," ING said.
"Trading in metals has been volatile since U.S. President Donald Trump’s inauguration, with this volatility mostly driven by both comments made by the President and tariff risks. In April, copper saw its worst performance since mid-2022, as signs began to emerge of trade starting to hurt economies, with the U.S. contracting in the first quarter and manufacturing in China’s factory activity showing the biggest contraction since December 2023."
Ambar Warrick contributed to this article.