Gold drops but still shines: What buyers should know now

Dubai: Gold prices have fallen for the third day in a row, dropping from recent record highs, as optimism about potential trade deals between the United States and other countries—including China—cools demand for safe-haven assets.

On Wednesday, the price of gold dropped by around 2%, falling to about $3,223 an ounce in London trading. That’s a sharp decline from last week, when gold briefly topped $3,500—a new all-time high. Even with this drop, gold remains up more than 20% this year, as investors continue to hedge against global economic uncertainty.

The pullback came after US officials suggested that a first wave of trade agreements might be close, helping lift confidence in financial markets. There were also reports that US representatives had reached out to China through backchannels, raising hopes that trade tensions could ease.

Why it matters

Gold is often seen as a safe investment during uncertain times, but as investor fears ease, some of that demand drops off. That’s part of what’s happening now. Still, the bigger picture hasn’t changed much: many investors are still concerned about the health of the global economy, especially as central banks continue buying gold and buyers in China remain active.

US econ data to aid prices?

New data shows that the US economy shrunk slightly in early 2025, its first contraction since 2022. Analysts say that’s partly because companies rushed to bring in goods before expected tariffs hit. In response, traders are now expecting the US central bank (the Federal Reserve) to cut interest rates four times this year in hopes of avoiding a recession.

That could end up helping gold prices. When interest rates are low, gold becomes more appealing since it doesn’t pay interest like savings accounts or bonds.

What to watch next

A closely watched US jobs report is due on Friday. It could offer more clues about how trade policies are affecting the economy—and how likely the Fed is to cut rates.

Other precious metals followed gold lower. Silver, platinum, and palladium all posted slight declines. Meanwhile, the US dollar strengthened slightly, which can also put pressure on gold prices by making it more expensive in other currencies.

- With inputs from Bloomberg