Gold Extends Losses as EU-US Trade Talks Weigh on Haven Demand

Gold extended declines as the dollar swung to a gain and demand for haven assets cooled, with investors also weighing prospects for improving trade relations between the US and the EU, Bloomberg reported.

Bullion fell as much as 0.8%, following a 0.4% loss on Monday, after Brussels said it would accelerate negotiations with Washington to avoid a trans-Atlantic trade war. Meanwhile, the dollar strengthened as markets digested news of the Japanese government considering reducing debt issuance. A stronger dollar makes gold more expensive for most buyers.

Demand for safer assets like gold has been impacted as signs emerge that the White House may be making progress in negotiations with some trading partners. Gold-backed exchange-traded funds registered five straight weeks of outflows since peaking at the highest in more than a year in mid-April, according to Bloomberg calculations.

But markets remain in wait-and-see mode, weighing a number of risks including the swelling US deficit, ongoing trade talks, and worsening conflicts in the Middle East and Ukraine.

Gold has advanced by more than a quarter this year, though prices are currently trading about $180 below an all-time-high set last month. Citigroup Inc. reverted to a short-term call for $3,500 per ounce on Monday.

Investors are also gearing up for the Federal Reserve’s preferred inflation measure, the US personal consumption expenditures price index excluding food and energy, which will be released Friday.

Spot gold was down 0.7% to $3,324.60 an ounce as of 7:06 a.m. in London. The Bloomberg Dollar Spot Index was up 0.1%. Platinum extended declines after last week reaching the highest level in two years on signs of market tightness. Silver and palladium also tumbled.