Gold prices dropped on Tuesday as softening trade tensions between the U.S. and its trading partners dulled the metal's safe-haven appeal, while investors awaited U.S. economic data to assess the Federal Reserve's policy path.

Spot gold was down 0.8% at $3,314.65 an ounce, as of 0619 GMT. U.S. gold futures lost 0.7% to $3,324.20.

"The risk environment has clearly improved recently, with market participants buoyed by optimism that the worst of the trade tensions may be behind us amid encouraging rhetoric around trade deals," said IG market strategist Yeap Jun Rong.

U.S. Treasury Secretary Scott Bessent said on Monday several top trading partners had made "very good" proposals to avoid U.S. tariffs, with India likely to be among the first to finalize a deal.

China's recent moves to exempt certain U.S. goods from its retaliatory tariffs showed a willingness to de-escalate trade tensions, Bessent added.

U.S. President Donald Trump's administration will also move to reduce the impact of his automotive tariffs by alleviating some duties imposed on foreign parts in domestically-manufactured cars.

But risks are high that the global economy will slip into recession this year, according to a majority of economists in a Reuters poll, with many saying Trump's tariffs have damaged business sentiment.

Bullion, traditionally seen as a hedge against political and financial instability, rose to an all-time high of $3,500.05/oz last week due to elevated uncertainties.

Investors will monitor economic data this week, including the U.S. job openings report later in the day, Personal Consumption Expenditures on Wednesday, and the non-farm payrolls report on Friday.

"Longer-term structural tailwinds for gold prices are likely to keep the broader upward trend intact, supported by room for ongoing reserve diversification among emerging market central banks," Rong said.

Spot silver was down 0.6% at $32.98 an ounce, platinum fell 0.2% to $984.65 and palladium lost 0.5% to $944.34.

Source: Reuters