Having hit a six-year high in early morning trading on Tuesday, gold fell two percent after the United States said it would delay tariffs on some Chinese products.
Spot gold was down 0.7 percent at $1,501.22 per ounce in afternoon trading while US gold futures settled down 0.2 percent to $1,514.1 an ounce.
The move marked a sharp reversal from earlier in the trading day when US-China trade tensions combined with unrest in Hong Kong and a sharp decline in Argentine assets helped drive gold to a more than six-year high as investors sought a safe haven from political and economic uncertainty.
The office of the US Trade Representative said the administration of US President Donald Trump will delay 10 percent tariffs on certain Chinese products – including laptops and mobile 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 Capital Markets.
“While this does not dramatically dim the overall positive outlook for gold, it will temper its momentum in the short term.”
US stocks turned positive and the dollar rose on the perceived thaw in recent trade tensions, with momentum coming from news that both sides had agreed to conduct phone calls to discuss trade differences in two weeks.
“Gold will be trading in a defensive position until the next two weeks,” said ,”There will be some buying at the dips, but the explosive moves higher we’ve seen in the last two weeks are not expected with the trade talks hanging over the market.”
Gold’s rise to over six-year highs earlier in the day was triggered by a rout in the Argentine peso and protesters clashing with police at the Hong Kong international airport after flights there were disrupted for a second day.
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 91.2 percent chance that Fed will cut interest rates by a quarter of a percentage point when policymakers meet this September.
Prices of other precious metals also slipped on news of a possible thaw in the US-China trade war. Silver fell 0.5 percent to $16.97 per ounce, while platinum was up 0.5 percent to $856.41. Palladium, meanwhile, gained two percent to $1,456.20 an ounce.