Gold prices slipped on Tuesday as the U.S. dollar strengthened and optimism grew over a possible U.S.-China trade agreement.
Spot gold fell 0.7% to $4,082.77 per ounce at 0158 GMT, while U.S. gold futures for December delivery dropped 1% to $4,095.80. The dollar hit a two-week high against the yen, making gold more expensive for buyers using other currencies.
Over the weekend, U.S. and Chinese officials discussed the framework for a new trade deal expected to be reviewed by Presidents Donald Trump and Xi Jinping later this week.
“This potential trade deal really came out of the blue and has been a positive surprise for markets,” said Capital.com analyst Kyle Rodda. “However, the flip side is that these developments have been negative for gold.”
Rodda added that gold’s uptrend may continue if fiscal and monetary policies remain loose, despite the recent dip in prices.
The Federal Reserve is expected to cut interest rates by a quarter percentage point this week following softer inflation data. While the move is already priced in, investors are watching for signals from Fed Chair Jerome Powell about future rate decisions.
Lower interest rates generally support gold since it doesn’t yield interest.
Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, dropped 0.52% to 1,046.93 metric tons on Friday.
In other precious metals, spot silver declined 0.3% to $48.42 per ounce, platinum rose 0.1% to $1,607.24, and palladium slipped 0.2% to $1,426.06.
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