Gold prices fell sharply on Monday as optimism over a potential U.S.-China trade deal boosted investor confidence in riskier assets.
Spot gold dropped 1.3% to $4,059.22 per ounce at 0837 GMT, retreating from its record high of $4,381.21 on October 20. U.S. gold futures for December delivery slipped 1.6% to $4,072.40.
Asian markets rallied as easing trade tensions between Washington and Beijing lifted sentiment ahead of major central bank meetings and key corporate earnings this week.
UBS analyst Giovanni Staunovo said, “A possible trade deal between the U.S. and China is supporting risky assets and weighing on gold. However, lower tariffs could also give the Federal Reserve room to cut rates further.”
U.S. President Donald Trump said he expects both countries to “come away with” a trade deal after officials finalized a framework for him and Chinese President Xi Jinping to review in South Korea later this week.
The Fed is widely expected to announce a 25-basis-point rate cut on Wednesday following softer September inflation data.
“Lower real interest rates should still support gold demand. Since the market already expects a rate cut, we may not see major movement after the Fed meeting,” Staunovo added.
Gold generally benefits from lower interest rates since it doesn’t generate yield.
Meanwhile, spot silver dropped 1.3% to $47.96 per ounce, platinum eased 0.3% to $1,601.75, and palladium rose 0.1% to $1,429.61.
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