Gold drops 2% to below $3200 an ounce

Gold prices fell in European trade on Wednesday, resuming losses and about to hit a two-week trough on weak haven demand as US-China trade tensions diminished. 

The losses are stymied by the dollar’s decline against a basket of major rivals as traders await more data and official remarks to provide clues on the future path of Fed interest rates.

The Price

Gold prices fell 0.9% today to $3221.84 an ounce, with a session-high at $3257.

On Tuesday, gold rose 0.45% away from two-week lows at $3207.

Trade Tensions 

The US said it’ll reduce tariffs on low-cost Chinese shipments, worth less than $800, to 30%, reducing the severity of the trade war even further.

On Monday, President Trump said he doesn’t expect tariffs on Chinese goods will return to 145% after the 90-day pause, adding he expects to reach a final deal with Beijing.

US Dollar

The dollar index fell 0.55% on Wednesday, away from five-week highs against a basket of major rivals.

A weaker dollar makes greenback-denominated gold futures cheaper to holders of other currencies.

US Rates

Recent US inflation data missed estimates, showing reduced inflationary pressures on Fed policymakers.

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in June stood at just 8%, and the odds of such a cut in July stood at 40%.

Traders are now pricing in 50 basis points of US interest rate cuts this year, likely starting next September.

SPDR

Gold holdings at the SPDR Gold Trust fell 2.58 tons yesterday to a total of 936.51 tons, the lowest since April 8.