Spot Gold plunged to a three-week low of $3,921.72/oz. on Tuesday, since optimism over a potential US-China trade agreement seemed to have reduced the safe-haven allure of the precious metal.
Top economic officials from US and China over the weekend hashed out the framework of a trade deal for US President Donald Trump and Chinese President Xi Jinping to decide on this week.
“A de-frosting of U.S.-China trade relations has somewhat pulled the rug out from under the gold price due to a decline in safe-haven buying flows,” KCM Trade Chief Market Analyst Tim Waterer was quoted as saying by Reuters.
“If Trump and Xi have a productive meeting on trade this week, this could leave gold swimming against the current to some degree. But this could be offset if the Fed delivers a dovish tone with the expected rate cut this week.”
Investor focus now sets on the outcome of the Federal Reserve’s two-day policy meeting.
The Fed is widely expected to lower its federal funds rate target range by 25 basis points to 3.75%-4.00% at its October meeting.
In September, the Fed cut borrowing costs by 25 basis points and indicated another 50 basis points of rate cuts by the end of the year.
Investors will also be paying close attention to the press conference with Fed Chair Jerome Powell for clues over the timing of future interest rate cuts.
The Fed chief had described the September policy action as a risk-management cut addressing the weakening labor market. Powell had also said the central bank was in a “meeting-by-meeting situation” in regard to the rate outlook.
Spot Gold was down 1.41% on the day to trade at $3,925.99 per troy ounce.
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