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Gold prices declined on Monday following remarks by US President Donald Trump signalling progress in several trade agreements and announcing an extended tariff reprieve for multiple countries. The development dampened demand for gold as a safe-haven asset, leading to a modest pullback in prices.
As of 0028 GMT, spot gold was down 0.3 percent, trading at US$1,323.71 per ounce, while US gold futures mirrored this decline, falling 0.3 percent to US$1,332.20 per ounce.
Trade Agreement Advances Impact Safe-Haven Appeal
President Trump indicated that the US was nearing the finalization of several key trade agreements in the coming days. He also stated that affected countries would be notified of higher tariff rates by July 9, with those rates scheduled to take effect August 1. This extension granted a three-week reprieve to most nations facing tariffs, easing immediate economic pressures.
In April, Trump imposed a base tariff of 10 percent on most countries, with additional duties reaching as high as 50 percent on selected imports. The delay in enforcing the higher tariffs reduced immediate inflation concerns, which had previously contributed to gold’s appeal as a hedge against economic uncertainty.
Impact on Federal Reserve Policy Expectations
Concerns around tariff-driven inflation had influenced expectations for Federal Reserve monetary policy. However, recent shifts in market sentiment now suggest traders no longer anticipate a Federal Reserve interest rate cut this month. Instead, rate futures imply only two quarter-point reductions may occur by the end of 2025. This moderating outlook on rate cuts reduces gold’s attractiveness, as higher rates typically strengthen the US dollar and weigh on non-yielding assets like gold.
US Fiscal Stimulus and Debt Considerations
Adding complexity to the market environment, last week President Trump signed a significant tax and spending package into law. Independent analyses estimate that the stimulus could increase the US federal debt by more than US$3 trillion, on top of an existing US$36.2 trillion debt load. While expansive fiscal policy can fuel inflation and thus support gold prices, the immediate market reaction has remained cautious amid ongoing trade negotiations and monetary policy shifts.
Currency and Geopolitical Factors
The US dollar index weakened by 0.3 percent on Monday, continuing its second consecutive weekly decline. A softer dollar typically makes gold more affordable for international buyers, which can support demand. Meanwhile, geopolitical developments also influence precious metals markets. Indirect ceasefire talks between Hamas and Israel in Qatar ended inconclusively, with Israeli representatives lacking the mandate to reach an agreement, maintaining underlying geopolitical tensions.
Other Precious Metals Market Update
In related markets, spot silver remained steady at US$36.94 per ounce. Platinum prices eased 0.3 percent to US$1,388.06, while palladium held firm at US$1,134.38 per ounce.
