Investing.com - Gold prices fell on Thursday as risk appetite recovered amid investor bets that recent tariff announcements by the U.S. and China are negotiating tactics and the countries will ultimately reach a compromise.
Gold futures for June delivery on the Comex division of the New York Mercantile Exchange were last down by $13.10, or around 1%, to $1,327.20 a troy ounce at 10:46AM ET (14:46GMT).
Prices of the precious metal had rallied to a one-week high on Wednesday after China announced a fresh wave of tariffs on U.S. imports, in retaliation to a Trump administration plan to impose tariffs on Chinese products.
Worries that protectionist trade policies might result in a full blown trade war boosted safe haven demand for gold, amid fears over the impact on the global economy and U.S. growth.
But trade tensions eased after President Donald Trump's chief economic adviser Larry Kudlow said late Wednesday that proposed tariffs on China may not actually take effect and added that there is not a trade war between the U.S. and China.
Market sentiment was also helped by hopes that the U.S. could reach a deal with Canada and Mexico over the North American Free Trade Agreement.
The decrease in trade tensions lowered demand for the safe haven asset which is usually sought out as a store of value during times of political or economic uncertainty.
Also weighing on gold prices, the dollar rebounded on Thursday as worries cooled off. A stronger greenback makes the dollar-denominated metal more expensive for holders of other currencies.
At 10:39AM ET (14:39GMT), the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last down 0.21% to 89.66.
The greenback saw little movement after mixed data out of the weekly jobless claims’ data. Although new applications for U.S. unemployment benefits increased more than expected last week, the total number of Americans in unemployment fell to its lowest level since 1973.
Investors were turning their attention to the more comprehensive official government report that will be released on Friday. Economists expect the creation of 193,000 nonfarm payrolls.
Signs of increasing wage growth in that report could underline the case for the Federal Reserve to raise interest rates at a faster pace.
Furthermore, Fed chairman Jerome Powell will have an opportunity to comment on the employment report in an appearance scheduled after the release on Friday, which could determine the direction of the U.S. currency.
Expectations of rising rates tend to boost the dollar by making the currency more attractive to yield-seeking investors. At the same time, gold suffers due to not only the weaker greenback but tends to be less attractive as a non-yield bearing asset with rates on the rise.
Elsewhere in metals trading, silver gained 0.10% to $16.270 a troy ounce by 10:48AM ET (14:48GMT), platinum dropped 0.38% at $914.60 a troy ounce, palladium traded down 1.29% to $906.10 a troy ounce, while copper jumped 1.71% to $3.063 a pound.