Gold prices continued to weaken on Wednesday (July 23rd) following reports that the US and the European Union were close to reaching a deal on 15% tariffs, which reduced demand for safe-haven assets. Meanwhile, silver had earlier surged to its highest level since September 2011.

Spot gold fell 1.1% to $3,394.64 an ounce at 2:33 PM ET (18:33 GMT), after hitting its highest level since June 16th earlier.

US gold futures closed down 1.3% to $3,397.60. "So, we're seeing a trade deal with Japan and also with the European Union. Ultimately, this means there are no major retaliatory tariffs from the European Union, which has been supportive of risk appetite... equity markets are performing quite well," said Bart Melek, head of commodity strategies at TD Securities.

The European Union and the United States are moving toward a trade deal that would impose 15% tariffs on EU goods imported into the US, two diplomats said on Wednesday. This comes as US President Donald Trump also reached a trade deal with Japan on the same day to lower tariffs on auto imports, an encouraging sign of progress in his broader tariff negotiations across multiple areas.

Gold bullion tends to strengthen in times of uncertainty and also in low-interest-rate environments because the opportunity cost of holding non-yielding assets decreases. The market does not expect a rate cut from the US Federal Reserve in July, but the Fed's independence appears threatened by increasing political interference, according to a majority of economists surveyed by Reuters.

Among other metals, spot silver fell 0.1% to $39.24 an ounce, after hitting a nearly 14-year high earlier in the trading session. "Silver's recent rally has been driven by a combination of strong industrial demand, a persistent supply deficit and rising investor interest," said Alexander Zumpfe, a precious metals trader at Heraeus Metals in Germany.

"A strong push past $40 could come from further gold price gains, renewed US dollar weakness, or signs of deeper supply tightness – particularly if physical premiums start to rise again in key Asian markets." Platinum fell 2.1% to $1,411.63, and palladium fell 0.2% to $1,271.98. (alg)

Source: Reuters