Gold and EUR/USD fell on Monday as the dollar strengthened following the announcement of the EU/US trade deal.
Gold extended declines as the safe-haven trade lost its appeal and the dollar rallied.
“Gold has experienced three consecutive sessions of decline, shedding nearly $100/oz from its recent peak around $3,440/oz,” said Linh Tran, Market Analyst at XS.com.
“This is a significant correction, reflecting a shift in short-term market sentiment and indicating that the precious metal is currently under pressure from both economic and geopolitical factors.
“One of the key drivers behind this pullback stems from a series of positive signals on the global trade front. The recently announced U.S.–Japan trade agreement has rekindled hopes of easing global trade tensions. More notably, over the past weekend, the United States and the European Union reached a framework trade deal aimed at averting a full-blown trade war, agreeing to impose a 15% tariff on most goods instead of the higher rates previously feared.”
Traders may have been surprised to see EUR/USD fall in the wake of the EU/US trade deal, but the Euro had performed strongly going into the announcements and was due a technical pullback. There is also an element of caution driving trade on Monday, with risk events including the July Non-Farm Payrolls scheduled for this week.