Gold Prices Drop Sharply as US-China & US-UK Trade Deals Strengthen US Dollar

Date: May 13, 2025
Category: Gold Market News | Trade Policy Impact | DailyForex.pk

Summary:
Gold prices plunged as breakthrough trade deals between the US, China, and the UK boosted the US dollar and improved the global economic outlook. The developments signal reduced inflation risks and less safe-haven demand for gold.

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📉 Gold Prices Tumble Amid Trade Deal Optimism

Gold futures fell sharply on Monday, with the June 2025 contract dropping 2.62% ($87.30) to settle at $3,241.80 per troy ounce. This steep correction follows gold’s recent peak of $3,509.90 in April and now positions key support levels between $3,176.50 (61.8% Fibonacci retracement) and $3,157.70 (50-day moving average).

The main driver of this pullback is renewed optimism in the global trade landscape.

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🤝 US-China Trade Truce Marks Major Economic Shift

Over the weekend, US-China trade talks in Geneva resulted in a landmark tariff reduction agreement. Starting Wednesday:

• US tariffs on most Chinese imports will drop from 145% to 30%
• China tariffs on US goods will be cut from 125% to 10%

Strategic sectors like steel, aluminum, and automobiles will remain under stricter tariffs, but this 90-day tariff truce is widely expected to become permanent. Analysts believe the agreement will help cool inflation and boost global export activity.

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🇺🇸🇬🇧 US-UK Trade Deal: A Boost for American Farmers

The US also signed a new trade agreement with the UK, unlocking $5 billion in export opportunities, especially for American agriculture. Highlights include:

• $700M in ethanol exports
• $250M in other agricultural goods
• Boost in beef exports, as per the US Meat Export Federation and USDA

Agriculture Secretary Brooke Rollins confirmed the deal’s importance in strengthening transatlantic food and trade flows.

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💵 US Dollar Index Rallies, Weighing on Gold

As investor confidence returned, the US Dollar Index surged 1.37% to 111.63, accounting for half of gold’s price decline. A stronger dollar typically reduces gold demand, which is priced in USD globally.

The remaining pressure came from aggressive gold futures selling, reflecting reduced investor appetite for safe-haven assets amid improving global conditions.

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📊 Economic Outlook: Growth Up, Inflation Down

These trade agreements are expected to:

• Lower transaction costs
• Improve export competitiveness
• Reduce inflation via cheaper imports
• Support GDP growth

However, this presents a headwind for gold, which thrives in high-inflation or uncertain environments. If inflation remains stable and growth continues, gold could remain under pressure in the second half of 2025.

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🔍 Key Levels to Watch

• Support: $3,176.50 – $3,157.70
• Resistance: $3,300 – $3,370
• Dollar Index Resistance: 112.00

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📌 Conclusion

The US-China and US-UK trade agreements have reshaped the short-term outlook for global markets. While this benefits the broader economy, gold prices may remain subdued due to waning inflation fears and reduced safe-haven demand. Traders and investors at DailyForex.pk should monitor upcoming US inflation data and central bank policy signals for the next gold market catalyst.

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