Investing.com - Gold prices moved lower in early morning European trade on Monday as U.S. Treasury Secretary Steven Mnuchin said a day earlier that a trade war between China and the U.S. is now on hold, reducing the demand for safe haven assets.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange was down $8.60, or around 0.7%, to $1,282.70 a troy ounce by 4:33AM ET (8:33GMT).
Meanwhile, the dollar opened the week rising against the other major rivals, climbing to a fresh new high this year. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, gained 0.26% to 93.82, its highest level since mid-December.
The dollar picked up as China and the U.S. agreed to halt imposing punitive import tariffs. Chinese and American negotiators set up a framework to address the trade imbalances.
U.S. Treasury Secretary Steven Mnuchin said on Sunday that the trade war with China is now put on hold. "We are putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework," Mnuchin said.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – a gain in the dollar makes gold more expensive for holders of foreign currency and thus decreases demand for the precious metal.
While the agreement means that both sides will avoid billions of dollars in tit-for-tat tariffs, China has yet to agree to cut the trade deficit despite President Donald Trump’s demand that the world’s second largest economy reduce its trade surplus by $200 billion.
In a session with no major economic reports stateside, market participants will focus their attention on appearances from Federal Reserve policymakers as they seek to gauge plans for policy tightening.
Atlanta Fed president Raphael Bostic, Philadelphia Fed chief Patrick Harker and the head of the Minneapolis Fed, Neel Kashkari, will be giving speeches on Monday afternoon.
That said, the focus this week will undoubtedly be on Fed chairman Jerome Powell who will participate in a panel discussion of "Financial Stability and Central Bank Transparency" at the Sveriges Riskbank Conference in Stockholm, Sweden on Friday.
Markets are currently pricing in a rate hike at the next Fed meeting on June 12-13, in what would be the second move this year. The uncertainty lies on whether there will be a fourth increase in December with the odds currently hovering just above the 50% threshold.
Higher interest rates tend to weigh on demand for gold, which doesn’t bear interest, in favor of yield-bearing investments.
In other metals trading, silver futures lost 14 cents, or 0.8%, at $16.320 a troy ounce by 4:34AM ET (8:34GMT).
Palladium futures traded up 0.5% to $964.90 an ounce. Sister metal platinum slid 0.6% at $880.80.
In base metals, copper gained 0.8% to $3.089 a pound.