Gold dips again: Why prices are set to drop even further in the coming days

Dubai: Gold prices slid for the second time in three days on Wednesday, as cooling tensions between the US and China continued to sap demand for safe-haven assets. With a temporary truce in place, investors rotated into riskier bets, putting pressure on bullion.

Spot gold fell 0.6% to $3,231.56 an ounce after rebounding briefly on Tuesday. That modest gain has now been fully erased, with bullion down almost 1% since the start of the week. In the UAE, the price for 24K gold dropped to Dh388 per gram from Dh392 yesterday, while 22K traded at Dh359 from Dh362.  (Check live rates here.)

The latest retreat in prices follows a weekend breakthrough in Switzerland, where Washington and Beijing agreed to pause their escalating tariff war. The US slashed duties on Chinese goods from 145% to 30% for 90 days, while China rolled back levies on most US imports to 10%.

That progress in Sino-US trade talks that ended in a deal not only spurred optimism in markets, but is also triggering a pullback from traditional havens like gold, meaning the news will further weigh on prices some more given how prices have been soaring off late on fears of an escalating trade war, flag analysts.

“The US–China tariff rates surprised materially to the downside, which eases investor concerns around trade-driven growth risks,” said Justin Lin, analyst at Global X ETFs. “Capital is likely flowing out of defensive sectors and gold.”

Adding to the pressure on gold: traders are now pricing in just two interest rate cuts from the US Federal Reserve this year — fewer than previously expected. That makes yield-generating assets more attractive compared to gold, which offers no returns.

Despite the week’s pullback, gold remains up nearly 25% year-to-date, having surged to a record high above $3,500 an ounce in April amid geopolitical tensions and inflation worries.

“The devil is in the details during negotiations,” warned Christopher Wong, strategist at Oversea-Chinese Banking Corp. “Some degree of caution remains warranted, as we see consolidation in the range of $3,150 to $3,350 an ounce.”

Retail shoppers hoping for a jewellery bargain may be seeing their best chance — for now. Unless a fresh shock hits markets and revives haven demand, gold may remain rangebound, offering a limited window to “buy the dip.”