Gold prices fell sharply on Tuesday, as the U.S. dollar gained ground and President Donald Trump dialed back his threats of new tariffs on the European Union, reducing the urgency for safe-haven trades.
According to a Tuesday morning update from Reuters, spot gold plunged 1.4% to $3,297.49 an ounce at 11:00 a.m. GMT, while U.S. gold futures fell more, down 2.1% to $3,296.50. This marks the second consecutive day of losses for gold following Trump's unexpected tone shift over the weekend.
On Sunday, Trump backed off his threat to impose a 50% tariff on the EU next month. Instead, he gave negotiators a new deadline of July 9. That was all investors needed to step away from the precious metal and dive back into riskier assets.
As stocks recovered, the allure of gold quickly faded. Ole Hansen, head of commodity strategy at Saxo Bank, said: “Gold is trading lower for the second consecutive day with technical selling along a downward trend line since April's record, being supported by reduced safe-haven demand amid rising stocks after Trump softened his aggressive trade stance with the EU.”
Dollar gains and Fed expectations push gold and metals lower
While gold was already under pressure due to technical factors, the real blow came from the dollar index, which reversed its previous weakness to trade 0.3% higher. That increase in the greenback made the yellow metal more expensive for international buyers, pushing even more out of the market.
At the same time, investors turned their attention to Washington, where several Federal Reserve officials are expected to speak this week. Traders are also watching Friday's underlying PCE inflation data, hoping it will provide clues about the central bank's next rate move. Lower interest rates typically make non-yielding gold more attractive, but the current setup hasn't yet moved that needle.
Ole reinforced the economic watchlist: “Gold traders will be watching incoming U.S. economic data for signs of tariff-related slowdown and/or rising inflation.” At this time, markets are pricing in 47 basis points of cuts by year-end, with the first move expected in October.
Rhona O’Connell, an analyst at StoneX, does not expect much short-term action. “The short-term outlook hasn’t changed: gold continues to consolidate. We expect prices to remain supported as markets deal with ongoing uncertainty, but we believe the peak has already been reached,” she said.
It wasn't just gold that was affected. Across the precious metals space, it was a tough session. Spot silver fell 0.9% to $33.06 an ounce. Platinum lost 0.7% to settle at $1,077.77. Palladium also slipped 1%, ending the day at $978.01.
In other parts of Europe, stocks were feeling the momentum. The Stoxx 600 index rose by 0.99% overall. All sectors traded in positive territory, but automobile manufacturers stood out. After losing 3% in the previous session, European car stocks surged 1.7% on Monday, directly reacting to the White House's rate pause.
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