Gold prices dropped sharply as investor sentiment shifted following former U.S. President Donald Trump's decision to delay tariffs on European Union goods. The market responded with renewed risk appetite, causing the yellow metal to retreat from recent highs. Despite the drop, the broader outlook for gold remains optimistic as investors monitor key U.S. economic data and global trade developments.
1. Gold Price Plunges as EU Tariff Delay Boosts Risk Appetite
Gold prices plunged nearly 2% on Tuesday as global financial markets rallied on news that Donald Trump had postponed a proposed 50% tariff on European Union goods. This policy shift boosted investor confidence, pulling funds away from traditional safe-haven assets like gold. The gold price dropped significantly in response, dipping below the crucial $3,300 threshold.
June gold futures declined by $62.00, or 1.84%, to $3,303.70 per ounce on the COMEX division of the New York Mercantile Exchange. Despite the recent drop, the gold price is still up more than 25% in 2025, underscoring its long-term bullish trend.
Silver also felt the pressure, though losses were less severe. July silver futures slipped $0.269, or 0.8%, to $33.34 an ounce. The white metal has enjoyed a solid year-to-date gain of around 14%, though it has moved sideways in May.
2. Strong U.S. Dollar and Market Optimism Weigh on Gold Price
The decision to delay tariffs came after Trump stated on Truth Social that the EU had finally shown willingness to engage in trade negotiations. This delay, welcomed by investors, triggered strong rallies in U.S. stocks, with benchmark indexes surging up to 2.25%.
Meanwhile, the U.S. Dollar Index (DXY) gained 0.43% to 99.54, strengthening the dollar and increasing the pressure on the gold price. A stronger greenback tends to be bearish for dollar-denominated commodities like gold, as it becomes more expensive for international investors.
Treasury yields fell in tandem, with the 10-year benchmark note losing 7.3 basis points to 4.438%. Yet, despite lower yields—which typically support gold—the metal’s safe-haven allure was diminished by the improved market mood and stronger consumer confidence data.
3. Investors Eye Economic Data and Fed Signals for Gold Price Clarity
As the week progresses, investors are turning their attention to several critical data releases. Key among them are the Federal Reserve’s latest meeting minutes, the second estimate of Q1 GDP, and the Core Personal Consumption Expenditures (PCE) Index, which is the Fed’s preferred inflation gauge.
Durable Goods Orders in April dropped 6.3%, a sign of weakening business confidence amid ongoing tariff uncertainty. However, this data failed to lift the gold price, which remained under pressure due to investor optimism and trade deal hopes.
Minneapolis Fed President Neel Kashkari emphasized caution on interest rate adjustments, signaling a wait-and-see approach until trade-related price volatility stabilizes.
4. Gold Market Outlook: Is the Bull Run Over?
Despite Tuesday’s sharp drop, many analysts remain optimistic about the long-term gold price outlook. Concerns about the U.S. fiscal deficit, which recently prompted Moody’s to downgrade U.S. government debt from AAA to AA1, continue to support demand for precious metals.
Additionally, China’s net gold imports via Hong Kong surged in April, more than doubling from the previous month and reaching their highest levels since March 2024, according to Reuters. This signals robust physical demand that could provide a cushion for further gold price declines.
Technically, gold remains in a consolidation phase, hovering around $3,300. A break above this level could lead to a retest of the May high of $3,438. On the downside, a fall below $3,250 could trigger a deeper correction toward the 50-day Simple Moving Average near $3,204.
5. Conclusion: Gold Price Faces Short-Term Volatility, Long-Term Potential Remains
The recent pullback in the gold price underscores how sensitive the precious metal is to shifts in geopolitical policy and economic sentiment. While investors are currently favoring riskier assets due to trade optimism and a strong U.S. dollar, the broader macroeconomic backdrop continues to support a bullish outlook for gold.
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