Gold drops as US-China trade deal hopes ease safe-haven demand

Spot gold fell 0.4% to $3,298.12 an ounce as of 0214 GMT.

Gold prices declined on Monday as optimism over easing U.S.-China trade tensions dampened safe-haven demand, while a stronger-than-expected U.S. jobs report tempered expectations of interest rate cuts by the Federal Reserve.

Spot gold fell 0.4% to $3,298.12 an ounce as of 0214 GMT. U.S. gold futures lost 0.9% to $3,317.40.

Three top aides of U.S. President Donald Trump will meet with their Chinese counterparts in London later in the day to discuss resolving the trade dispute between the two largest economies, a standoff that has kept global markets on edge.

"Short-term traders do not want to take aggressive long positions right now ahead of the outcome of U.S.-China talks," said Kelvin Wong, a senior market analyst, Asia Pacific at OANDA.

However, tariffs won't disappear, but talks may lower the baseline, Wong said, adding that the cost of doing business in the U.S. will remain elevated and the widening U.S. budget deficit could create a double feedback loop that exacerbates inflationary pressures.

The U.S. economy added 139,000 jobs in May, surpassing analysts' expectations, while the unemployment rate was unchanged at 4.2%, the Labor Department said.

Wage growth exceeded forecasts, dampening the likelihood of imminent rate cuts.

Investors scaled back bets on rate cuts and are anticipating one reduction in October, while awaiting the U.S. CPI data due on Wednesday for more cues.

Meanwhile, Trump said a decision on the next Fed chair would be announced soon, adding that a "good Fed chair" would lower rates.

On the geopolitical front, Trump's order banning citizens of 12 countries from entering the U.S. takes effect on Monday.

Non-yielding bullion, often viewed as a safe-haven asset during economic and geopolitical uncertainties, tends to perform well in a low-interest-rate environment.

Elsewhere, spot silver was unchanged at $35.97 per ounce, platinum fell 0.5% to $1,163.64, while palladium held steady at $1,046.18.