Gold dropped 3% to a more than one-week low on Monday after the U.S. and China said they have agreed to a deal to slash reciprocal tariffs, sending the dollar higher and denting the safe-haven metal's appeal.

Spot gold was down 3% at $3,224.34 an ounce, as of 0812 GMT, its lowest since May 1. U.S. gold futures slipped 3.5% to $3,228.10.

"The de-escalation of tensions between China and the U.S., with tariffs being reduced for 90 days, is reducing the demand for safe haven assets like gold," said UBS analyst Giovanni Staunovo.

"Near-term prices are likely to stay volatile. But higher tariffs are still weighing on economic growth and likely force central banks to cut further interest rates later this year. Also central banks might use this price setback to add exposure."

In a substantial de-escalation of a potentially damaging trade war, the U.S. and China said they have agreed a deal to slash reciprocal tariffs as Washington and Beijing seek to end a trade war that has disrupted the global economy.

Speaking after talks with Chinese officials in Geneva, U.S. Treasury Secretary Scott Bessent told reporters the two sides had reached a deal for a 90-day pause on measures and that reciprocal tariffs would come down by 115%.

The U.S. and China imposed tit-for-tat tariffs on each other last month, triggering a trade war that fuelled fears of global recession.

Meanwhile, the dollar index (.DXY)

, opens new tab jumped more than 1% against its rivals, making gold more expensive for other currency holders.

Gold is expected to decline as the dollar could appreciate and reducing geopolitical risk could "hurt the haven demand... the yellow metal may decline to $3,200/oz in the near term, said Jigar Trivedi, senior commodity analyst at Reliance Securities.

Traders are also eyeing the U.S. Consumer Price Index data on Tuesday for fresh signals on the Federal Reserve's monetary policy trajectory.

Spot silver slid 2.3% to $31.96 an ounce, platinum fell 1.2% to $983.44 and palladium dipped 0.9% to $967.35.

Source: Reuters