China has rocked the price of gold by dumping tonnes of the precious metal on the market.
The XAUUSD price has pulled back from highs above the $3,400 level and trades at $3,235. Larger support comes in at $3,000 for bullion.
Gold dropped to a two-week low on signs of potential trade progress between the US and other nations, reducing demand for a safe haven despite worries about weakening economies.
Prices were lower again by more than 2% as investors weighed improving sentiment on Wall Street after US President Donald Trump’s trade representative said he was nearing an announcement of the first trade deals. A report stated that the US had been talking to Beijing, which added to the positive sentiment.
The precious metal is up more than 23% this year after hitting a record above US$3,500 last week. The move started in 2024 with central banks being strong supporters of gold, with China and Turkey among the biggest buyers.
That has been the big driver of the metals trade and China stepping back is a big concern for gold. China had been seeing a huge inflow of money into gold ETFs and now investors may have to soak up losses.
Reports last week said the Chinese government had dumped tonnes of gold on the market and will raise alarm bells about the timing.
Peace talks between Ukraine and Russia could ease the demand for gold, while the imminent trade agreements will further reduce the desire for gold. The central bank buying has been a key theme for 1-2 years and if China believes the metal is overpriced then speculative money could come back out of gold.