Gold extends drop as US-China trade progress eases haven demand

Bullion fell as much as 1.2% to near $4,065 an ounce.

Gold declined — after posting its first weekly drop since mid-August — as the US and China neared a trade agreement and on signs that a scorching rally in precious metals has run too far, too fast.

Bullion fell as much as 1.2% to near $4,065 an ounce. The US and China signaled they were nearing completion of a sweeping deal as President Donald Trump visits the region for a series of diplomatic talks. An agreemeent would ease some of the geopolitical tensions that have bolstered demand for haven assets including gold.

A blistering rally that began in mid-August and propelled gold to a record just above $4,380 an ounce last Monday abruptly reversed the following day as investors moved to lock in profits. The selloff followed weeks of technical indicators flashing overbought conditions.

Still, the precious metal remains more than 55% higher for the year, with central-bank buying and the so-called debasement trade — in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits — providing support. The dip has also provided bargain-hunters with an opportunity to enter the market, with dealers from Singapore to the US seeing a rush of interest from people looking to buy.

Meanwhile, another kind of gold rush is unfolding this weekend in Kyoto, where nearly one thousand professional traders, brokers and refiners have descended on Japan’s ancient capital for a conference run by the London Bullion Market Association. Attendance at the conference — which began on Sunday — is at a record high, with a growing talent war for bullion traders likely to be a hot topic of conversation at the largest annual gathering for the precious metals industry.

Elsewhere, traders will be looking ahead to a busy week of central-bank announcements that includes rate decisions from the Federal Reserve, European Central Bank and Bank of Japan. The Fed is forecast to cut rates by 25 basis points, while the ECB and BOJ are expected to leave rates unchanged. Lower borrowing costs typically benefit bullion as it pays no interest.

Spot gold slipped 0.7% to $4,083.92 an ounce at 7:20 a.m. in Singapore, after posting a weekly loss of 3.3%. Silver fell, extending last week’s 6.3% drop week. Platinum and palladium were little changed.