By Barani Krishnan
Investing.com - Positive rhetoric over the trade talks is costing gold dearly.
Gold tumbled its biggest daily loss in six months after Reuters reported on Thursday that the United States and China were making significant progress in ending their seven-month trade war by outlining commitments in principle to end Chinese trade practices objected to by President Donald Trump.
U.S. gold futures benchmark April contract on the Comex division of the New York Mercantile Exchange settled down $20.10, or 1.5%, at $1,327.80 per ounce, snapping a five-day rally. It was the first drop in Comex gold since Valentine's Day and the sharpest percentage drop in a day since Aug. 13, when it settled down 1.7%.
Spot gold, reflective of trades in physical bullion, slid by $13.92, or 1%, to $1,324.51 per ounce by 2:07 PM ET (19:07 GMT).
Investors have been using gold as a hedge toward economic and political troubles. Progress in the U.S.-China trade negotiations, celebrated in equities and other risk markets, have weighed on the yellow metal. A rival safe haven, the dollar, however, rose on Thursday, climbing 0.2% to 96.498 against a basket of six major currencies.
Fitch Solutions said in a note that it had a neutral outlook on gold over the next three to six months.
"The dovish shift in Fed language over the year-to-date has improved the fundamental outlook for gold prices. Nonetheless, we expect that this development has largely been priced in by the 8% rally in gold prices since November 9, 2018, to $1,308/oz as of February 14," Fitch said.
"Prices should face significant resistance at the top of their three-year trading range around $1,375/oz and we expect that many long-positions would take profit should prices near this level," it added. "This view is bolstered by the fact that net speculative gold positions have already rebounded significantly from the bearish extreme that we highlighted back in November, reducing the potential for further short-covering in the coming months."
On Wall Street, U.S. stock prices moved lower as the Commerce Department said core durable goods orders rose less than expected in December. But losses in equities were muted by trade optimism.
"Markets seem to almost be willing to bypass the weak data that we've seen for the optimism over a resolution on trade," Ryan Detrick, senior market strategist at LPL Financial, was quoted saying by Reuters.
Some analysts, however, cautioned against too much optimism being placed on the talks as the negotiations involved tough issues such as Washington's demands for Chinese reparation over matters like forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.
Palladium remained the world's most valuable traded metal despite its spot price falling $14.90, or 1%, to 1,473.85 per ounce. On Wednesday, spot palladium reached a record high of $1,506.65.
Trades in other Comex metals as of 2:07 PM ET (19:07 GMT):
Palladium futures down $20.30, or 1.4%, at $1,441.80 per ounce.
Silver futures down 39 cents, or 2.4%, at $15.78 per ounce.
Platinum futures down $7.90, or 1%, at $826.30 per ounce.
Copper futures down 2.2 cents, or 0.8%, at $2.90 per pound.