Gold falls as hopes of US-China trade truce boost riskier assets

Gold prices fell on Thursday as hopes of a truce in the US-China trade spat ahead of a weekend meeting at the G20 summit rekindled investors' interest in riskier assets, weighing on safe-haven bullion.

The South China Morning Post, citing sources, said Washington and Beijing were laying out an agreement that would help avert the next round of tariffs on an additional $300 billion of Chinese imports.

Spot gold was down 0.3% at $1,404.85 per ounce by 1203 GMT, after shedding more than 1% in the previous session.

US gold futures fell 0.5% to $1,408.70 an ounce.

"The news that US and China have agreed to a trade truce should help the risk sentiment in the market and growth outlook. That should weigh on the gold prices," SP Angel analyst Sergey Raevskiy said.

On Wednesday, US President Donald Trump said a trade deal with his Chinese counterpart Xi Jinping was possible this weekend, though he was prepared to impose tariffs on virtually all remaining Chinese imports if talks fail.

The next move in gold could depend on how tensions between the United States and Iran pan out and the weekend G20 meeting, Raevskiy said, adding prices could go all the way back to $1,300 if there were positive developments on both fronts.

Gold has fallen more than $35 since touching a more than six-year peak on Tuesday, especially after officials from the US Federal Reserve signalled they would not resort to a big interest rate cut in July.

However, gold prices are still up 7.6% so far this month, with prices gaining nearly $70 since last week alone on hopes there will be at least a quarter percentage point reduction in July by the Fed.

"Gold was heavily overbought after this run towards $1,450 and a correction has ensued," said Rhona O'Connell, an analyst with INTL FCStone.

"The rally does not imply panic in other financial sectors, but that the markets are taking notice of potential economic, financial and political risks and the fact that gold enhances risk-adjusted returns."

Meanwhile, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.22% to 797.85 tonnes on Wednesday. Still, the holdings have risen 7.4% so far this month.

Among other precious metals, silver fell 0.2% to $15.21 per ounce and platinum rose 0.2% to $815.79

Palladium rose 0.2% to $1,526 an ounce.