Gold prices dropped more than one per cent overnight, slipping from a 14-month peak, after US President Donald Trump’s decision not to impose trade tariffs on Mexico spurred risk sentiment and lifted the US dollar from recent lows.
Spot gold dipped 1.1 per cent to $US1,326.13 per ounce.
The metal had hit $US1,348.08 an ounce in the previous session – its highest since April last year.
US gold futures settled 1.2 per cent lower at $US1,329.3 per ounce.
“Global equities are rallying across the board and we are seeing liquidation on safe haven demand,” said Phillip Streible, senior commodities strategist at RJO Futures.
“Gold futures are backing off and the (US) dollar index is rallying and prices are burdened with the Mexico tariffs.”
The United States and Mexico struck a deal on Friday, averting a potential tariff conflict, after Mexico agreed to co-operate in curbing the flow of illegal Central American migrants.
Markets worldwide were quick to cheer the deal, with MSCI’s index of stocks across the world up more than one per cent and Wall Street set to begin the week well.
The US dollar index also gained after dropping to a two and half month low in the previous session.
“Trader and investor attitudes are more upbeat to start the trading week after the US and Mexico late on Friday reached a deal,” said Jim Wyckoff, senior analyst at Kitco in a note.
“However, progress on the US-China trade war front remains elusive amid no signs the world’s two largest economies are coming closer to any agreement on trade matters”
Gold prices were still supported above key technical levels as investors see high probability that the US central bank will cut interest rates this year.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Fed fund futures now price in more than two 25-basis point rate cuts by year-end, with one almost fully priced in by July.
Weak US economic data and the China-US trade dispute are clouding the global economic outlook.
“Gold futures will continue to rise, so long as the yield curve continues to remain inverted. I’d like to see gold remain above $US1,320, with $US1,310 being a critical support level,” Streible added.
Reflecting increased investor interest in gold, speculators raised their net long position in COMEX gold in the week ended June 4, data showed on Friday.
Palladium erased the day’s losses to jump nearly two per cent to $US1,383.50 per ounce, taking cues from gains in the car sector, whose operations in Mexico and the United States are strongly intertwined.
Meanwhile, platinum shed 0.7 per cent to $US800.50 per ounce while silver dropped 1.6 per cent to $US14.76 per ounce.