Gold drops as dollar firms, trade deal hopes sap safe-haven demand
Spot gold fell 0.7% at $3,343.69 per ounce by 9:31 a.m. ET (1331 GMT). U.S. gold futures fell 0.8% to $3,345.20.
The U.S. dollar index rebounded from a more-than-two-week low, making bullion more expensive for overseas buyers, while benchmark 10-year U.S. Treasury yields rose.
"The Japan deal was significant, and there's hope for a U.S.-EU agreement before the August 1 deadline. That's sapping safe-haven demand as elevated risk appetite drives capital toward risk assets," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Following this week's U.S.-Japan trade deal, the European Commission said a trade deal with the U.S. is within reach, even as EU members approved counter-tariffs on U.S. goods in case talks fail.
On the data front, U.S. jobless claims fell to a three-month low, signaling a stable labor market despite sluggish hiring.
Stable labor market data is expected to give the Federal Reserve cover to hold rates steady at 4.25%-4.50% at its meeting next week, even as inflation shows signs of picking up due to U.S. President Donald Trump's import tariffs.
Trump's surprise visit to the central bank marked a fresh attempt to pressure Chair Jerome Powell, with the President again urging a deep rate cut.
Gold may attract some "buying interest probably at $3,300 level, but perhaps not breaking out to new all-time highs until after the Fed decision," Grant said, adding that the meeting could signal rate cuts later this year.
Gold typically performs well during periods of uncertainty and in low-interest-rate environments.
Spot silver fell 0.4% to $38.91 per ounce, but was still on track for a weekly gain of about 2%. Platinum was 1.6% lower at $1,385.20, while palladium rose 0.2% at $1,229.94.
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