Gold prices dropped to a two-week low on May 1, 2025, as easing trade tensions and a holiday in China, the world's largest consumer of the precious metal, contributed to a shift in market sentiment. Spot gold was recorded at $3,216.41 an ounce, down 2.2 percent, after reaching its lowest point since April 14 earlier in the day. U.S. gold futures also fell by 2.8 percent to $3,226.90. The decline followed a record high of $3,500.05 per ounce just a week prior.
Market analysts indicated that the recent drop in gold prices was influenced by a renewed risk appetite among investors. Bob Haberkorn, a senior market strategist at RJO Futures, commented, "There are hints of upcoming trade deals, and talk from China that the Trump administration had reached out. A risk-on trade is going on, leading to some profit-taking in gold's safe-haven." This sentiment was echoed by UBS analyst Giovanni Staunovo, who noted that the market is less concerned about Federal Reserve independence and sees trade tensions de-escalating, which has reduced the demand for safe-haven assets.
U.S. President Donald Trump has expressed optimism about potential trade agreements with countries including India, Japan, and South Korea, stating that there is a "very good chance" of reaching a deal with China. Additionally, a social media account linked to Chinese state media reported that the U.S. has initiated talks regarding Trump's 145 percent tariffs.
As Chinese markets were closed for the Labour Day holiday from May 1 to May 5, liquidity in the gold market was further impacted. Analysts from TD Securities noted that gold was being affected by this holiday-induced liquidity vacuum.
Despite the drop in gold prices, the structural drivers supporting the metal's value remain intact. Ole Hansen, head of commodity strategy at Saxo Bank, stated, "While the short-term correction has been driven by improved market sentiment, the structural drivers underpinning gold's strength remain firmly in place." This perspective is crucial as the market anticipates the release of the U.S. nonfarm payrolls report, which is expected to provide insights into the economic outlook.
On the economic front, data released on April 30 revealed that the U.S. economy contracted in the first quarter of 2025. The personal consumption expenditures price index remained unchanged, indicating stable inflation levels. These economic indicators, coupled with rising jobless claims, have fueled recession fears, although inflation remains close to the Federal Reserve's 2 percent target.
In the commodities market, other precious metals also experienced fluctuations. Spot silver fell 1.3 percent to $32.15, platinum decreased by 1.2 percent to $954.85, while palladium saw a slight increase of 0.4 percent to $941.14.
Looking at the Indian market, gold prices also saw a decline on May 1, 2025, with 22-carat gold trading at ₹8,850 per gram, down by ₹205, and ₹70,800 for 8 grams, down by ₹1,640. Prices for 24-carat gold also decreased, with 1 gram priced at ₹9,293 and 8 grams at ₹74,344. This trend reflects a broader pattern of falling gold prices across major cities in India.
Overall, the gold market is in a state of flux, navigating through signals of improved trade relations and economic uncertainty. Analysts suggest that a confirmed U.S.-China trade deal could significantly impact gold prices, potentially acting as a bearish trigger in the near term. Key support for gold on the Multi-Commodity Exchange (MCX) is seen at ₹91,000, while resistance is identified at ₹95,500.
As the market awaits further developments, investors are keenly focused on upcoming economic indicators and trade negotiations that could shape the future trajectory of gold prices. With the interplay of geopolitical factors and economic data, the precious metal remains a focal point in the investment landscape.
