Gold steady after three-day drop as trade hopes sap haven demand

Bullion was near $3,950 an ounce on Wednesday, a day before a scheduled meeting between Presidents Donald Trump and Xi Jinping.

Gold steadied after a three-day rout as appetite for riskier assets strengthened on hopes of a US-China trade breakthrough.

Bullion was near $3,950 an ounce on Wednesday, a day before a scheduled meeting between Presidents Donald Trump and Xi Jinping.

The Wall Street Journal reported the US would roll back some tariffs if China cracks down on the export of chemicals that produce fentanyl. A deal between the world’s two biggest economies would further bolster market sentiment, after a rally in technology companies also reinforced optimism over the artificial intelligence boom.

Gold has retreated sharply from a torrid rally that drove prices to a record above $4,380 an ounce last week, an ascent that some traders saw as overheated. Even after the pullback, the metal is up about 50% this year, supported by central-bank buying and the so-called debasement trade, in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits.

The surge has drawn in both institutional and retail buyers through gold-backed exchange-traded funds — though a hefty outflow has dented some of that support. Investors withdrew a net $1 billion from State Street’s SPDR Gold Shares on Monday, the most since April 22, according to data compiled by Bloomberg. The outflow came as total investor holdings of gold ETFs fell the most in six months.

Gold’s rapid rise — and recent retreat — has been a hot topic at the London Bullion Market Association’s precious metals conference in the Japanese city of Kyoto this week. The overall mood was bullish, with a survey of 106 attendees projecting that gold will be trading at nearly $5,000 an ounce in a year’s time.

“Gold continues to print lower lows, but the bulls will take comfort from the defense of $3,900 in the front-month futures,” Chris Weston, head of research at Pepperstone Group Ltd., said in a note. “There are now clearer signs that buyers are stepping in and that the recent positioning unwind may have run its course.”

Meanwhile, bets the Federal Reserve will cut interest rates later on Wednesday also buoyed appetite for riskier assets. While lower borrowing costs tend to benefit non-interest bearing precious metals, the prospect of looser monetary policy has also aided equity markets amid expectations that big tech companies will outperform analyst expectations. Five firms that account for about a quarter of the S&P 500 Index are due to report earnings on Wednesday and Thursday.

Spot gold was down 0.1% at $3,949.10 an ounce as of 7:41 a.m. in Singapore. Silver was steady, after posting a small gain in the previous session. Platinum edged lower, while palladium and the Bloomberg Dollar Spot Index were little changed.