Gold prices fell overnight as risk-on sentiment, bolstered by the upcoming signing of a preliminary US-China deal and signs of de-escalation in the Middle East, dampened demand for safe-haven bullion.
Spot gold fell 0.8 per cent to $US1,549.50 per ounce, having fallen 1 per cent to $US1,546.27 earlier in the session.
US gold futures settled down 0.6 per cent at $US1550.60.
“You remove the risk of geo-political tensions rising and you don’t quite need gold to beef up your portfolio,” said Bart Melek, head of commodity strategies at TD Securities.
Stock markets around the world lingered just below record levels, buoyed by the expected signing of the Phase 1 US-China trade deal.
The trade agreement, due to be signed at the White House on Wednesday, marks the first step towards ending an 18-month-long trade dispute between the world’s two largest economies.
The US dollar also rose against a basket of rivals, making bullion more expensive for holders of other currencies.
Signalling a further ramp down of trade tensions, a Wall Street Journal report said on Saturday that Washington and Beijing had agreed to semi-annual talks aimed at pushing reforms and resolving disputes.
Gold, considered a safe investment during political and economic turmoil, rose to a near seven-year peak of $US1,610.90 last week after a US drone strike killed an Iranian commander in Baghdad and Iran launched missiles against US bases in Iraq in retaliation.
The rally, however, faded with a lack of further military escalation in the region.
Markets will still keep an eye on tensions with Iran over the accidental shooting of a passenger plane, and the finer points of the implementation of the US-China deal, analysts said.
Reflecting investor sentiment, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell 0.9 per cent to 874.52 tonnes on Friday, their lowest since September 16.
“Gold will remain vulnerable to spikes but could trend lower in the interim, with a break of $US1,540 potentially triggering a move back towards $US1,520,” OANDA analyst Craig Erlam said in a note.
Elsewhere, palladium rose 0.6 per cent to $US2,129.23 an ounce. Silver was down 0.6 per cent at $US17.98, while platinum fell 0.4 per cent to $US974.65.