Why did gold record its biggest weekly decline in 6 months?

Gold jewelry on display at a jewelry store in Seoul, South Korea. (Photo: Yonhap/VNA)

The global gold market has been volatile over the past week, with a downward trend being the dominant trend. New developments related to the trade negotiations between the US and China have increased demand for risky assets and put pressure on the gold market.

In the last trading session of this week (May 16), world gold prices fell more than 2% and headed for the sharpest weekly decline since November 2024.

At 0:50 a.m. on May 17 (Vietnam time), the spot gold price fell 1.6% to $3,188.25/ounce, marking a 4.1% decrease for the week. The US gold futures price also closed down 1.2% to $3,187.2/ounce.

The main reason for the drop in gold prices is the return of optimism among investors after the news that the US and China reached a "truce" agreement. The two countries agreed to sharply reduce import tariffs within 90 days, with US tariffs reduced from 145% to 30% and Chinese tariffs on US goods reduced from 125% to 10%.

According to Mr. Jim Wycoff, senior analyst at Kitco Metals, profit-taking has been going on all week amid increased risk-on sentiment, putting gold under great downward pressure.

Gold prices have seen several sharp declines this week. On May 12, immediately after new progress in US-China trade negotiations was announced, spot gold prices plunged 3% to $3,225.28/ounce, while gold futures prices also fell 3.5% to $3,228/ounce. This was the market’s immediate reaction to the news that the world’s two largest economies had reached a “ceasefire,” overshadowing gold’s role as a “safe haven.”

On May 13, after US inflation data was lower than expected, gold prices recovered slightly thanks to bottom-fishing buying. The US consumer price index (CPI) in April 2025 increased by only 0.2%, lower than the forecast of 0.3%, reinforcing expectations that the US Federal Reserve will cut interest rates next September.

By the session on May 14, gold prices fell sharply by more than 2%, to the lowest level since April 11, at 3,181.62 USD/ounce, as investors continued to sell as trade optimism increased.

The gold market had a significant recovery on May 15. Spot gold rose 1.3% to $3,218.89 an ounce, while gold futures rose 1.2% to $3,226.6 an ounce after the US announced lower-than-expected producer price index (PPI) and retail sales for April. Russian President Vladimir Putin's absence from peace talks with Ukraine also contributed to supporting gold prices.

Gold prices have risen more than 21% since the beginning of 2025, hitting a record high of $3,500.05 an ounce last month due to concerns about an economic recession, geopolitical tensions and capital flows into gold ETFs.

Although the short-term trend of the gold market is leaning towards a downward adjustment, analysts said that supporting factors such as the possibility of the Fed cutting interest rates and geopolitical instability can still keep gold prices high in the medium term./.

(Vietnam News Agency/Vietnam+)

Source: https://baothanhhoa.vn/vi-sao-vang-ghi-nhan-tuan-giam-gia-manh-nhat-trong-vong-6-thang-249065.htm