Gold reversed course to slide as much as 2% on Tuesday, breaking below the key $1,500 support level, after the United States said it would delay tariffs on some Chinese products and on news that both sides agreed to continue trade talks. Spot gold was down 1.2% at $1,493.64 per ounce at 10:32 am EDT (1432 GMT), having earlier hit its highest level since April 2013 at $1,534.31. US gold futures was down 0.6% to $1,508.3 an ounce.
The Office of the US Trade Representative said the Trump administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month. "A thawing, perhaps reconsideration of the new proposed tariffs has drained the heat from the (gold) rally for now," said Tai Wong, head of base and precious metals derivatives trading at BMO.
"It may well be that US industry has told the White House that some goods targeted for tariffs cannot easily be substituted." US stocks turned positive and the dollar rose on the news, with further momentum also coming from news that both sides had agreed to conduct phone calls on trade again in two weeks. Gold prices had touched over 6-year highs earlier in the day, as unrest in Hong Kong and a rout in the Argentine peso drove investors into havens such as bullion at the expense of riskier assets such as stocks.
"While this does not dramatically dim the overall positive outlook for gold it will temper its momentum in the short term," BMO's Wong said. Market focus is now on the US Federal Reserve's annual symposium next week for clues on the future trajectory of interest rates. Traders see a 69% chance of a 25 basis-point rate cut by the US central bank this September.
Meanwhile, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, jumped 0.9% to 847.77 tonnes on Monday. Among other precious metals, silver fell 1.5% to $16.80 per ounce. Platinum was down 0.3% to $849.69, while palladium gained 2.3% to $1,460.18 an ounce.
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