Gold prices fell on Monday, extending losses after recording their first weekly decline since mid-August, as optimism surrounding a potential US-China trade deal dampened demand for the precious metal as a safe-haven asset

Spot gold dropped as much as 1.3%, trading near $4,058 an ounce, as both Washington and Beijing signalled that they were close to finalising a “sweeping trade agreement”. The development comes as US President Donald Trump continues his Asia tour, which includes meetings with Chinese President Xi Jinping aimed at resolving long-standing trade tensions between the two largest economies.

Trade optimism curbs bullion appeal

The signs of progress in trade negotiations have reduced market uncertainty, prompting investors to shift away from safe-haven assets such as gold and into riskier investments like equities. Analysts noted that gold’s rally over the past few months had been fuelled by concerns over global economic growth, high inflation, and geopolitical risks — factors that may now appear to be easing.

“Any tangible progress on trade talks, especially between the US and China, tends to weigh on gold prices as investor sentiment improves,” said a commodities strategist based in Singapore. “However, given the volatility of these discussions, the downside may remain limited in the short term.”

Previous week marked first decline since August

Last week, bullion prices posted their first weekly drop since mid-August, breaking a nearly two-month winning streak driven by strong central bank purchases and persistent global tensions. The recent decline, however, is seen as a short-term correction rather than the beginning of a longer bearish trend.

Broader market outlook

While the trade optimism has temporarily curbed demand, analysts expect gold to retain long-term support from monetary policy uncertainty, geopolitical risks, and inflationary pressures. Central banks across the world have continued to accumulate gold reserves as a hedge against currency volatility and potential recessionary shocks.

“Gold remains a preferred asset for diversification,” said another analyst. “Even if risk sentiment improves temporarily, the structural drivers for gold investment — including central bank buying and inflation concerns — are still intact.”

The next major trigger for gold prices could come from the Federal Reserve’s policy outlook and data from US inflation and employment reports expected later this week.