Gold prices took a steep dive on Monday, snapping a multi-day rally. The drop came amid easing U.S.-China trade tensions, a sharp rebound in the U.S. dollar, and profit-taking by investors, all of which combined to pressure the precious metal.

By 4 p.m. New York time, spot gold had slipped to $3,220.20 per ounce, down more than 3.1% for the day—its largest single-day loss since early May and the lowest closing level in nearly two weeks. Prices had touched an intraday high of $3,308.80 before retreating rapidly to a low of $3,206.20. Gold futures on the CME also ended lower, with the most active contract finishing at $3,228.10, down 3.5%.

The primary catalyst for the drop was a sudden cooling in geopolitical risks. The U.S. and China announced a preliminary tariff agreement, agreeing to pause new tariff hikes and roll back some existing ones over the next three months. The deal reduced demand for safe-haven assets like gold, as investors rotated toward riskier bets. Analysts noted a temporary drop in gold’s appeal as a hedge.

At the same time, the U.S. dollar index surged over 1% to hit a new high for the year, adding further weight to gold prices. A stronger dollar makes gold more expensive for buyers using other currencies, weakening global demand. Some of the dollar’s gains were attributed to shifting expectations around Federal Reserve policy. Despite persistently high inflation in the U.S., dovish remarks from Fed officials led markets to lower expectations for near-term rate cuts.

Technical factors also played a role in the downturn. Gold had previously rallied sharply, even setting a new record high in late April. With investor sentiment turning more positive overall, many market participants chose to lock in profits. Some capital also appeared to move into other assets—Bitcoin, for instance, returned to the $100,000 level, siphoning off some safe-haven interest. Even with some physical buying activity during the Asian session, it wasn’t enough to counteract the heavy selling pressure from Western trading hours.

Looking ahead, markets will be watching closely for the next U.S. Consumer Price Index (CPI) report covering April. Higher-than-expected inflation could raise the odds of interest rates staying elevated for longer, posing further headwinds for gold. Technically, the $3,200 level may offer some initial support; if that fails, prices could test lower ranges. Analysts caution investors to keep a close eye on the dollar’s trajectory, Fed policy signals, and key macroeconomic data to gauge where gold is headed next.

(Data as of U.S. market close on May 12, 2025)