Gold prices dip as US-China trade deal optimism benefits riskier assets

Gold edged down to a one-week low on Monday after the United States and China expressed willingness to sign an initial trade deal by year-end, boosting market sentiment and driving investors to higher-risk assets.

Having fallen for the previous three sessions, spot gold was down 0.3% at $1,457.03 per ounce at 1201 GMT, after earlier touching its lowest since Nov. 18 at $1,455.90. U.S. gold futures were down 0.5% at $1,456.90.

"The ultimate threat of a full escalation into a trade war, with bans and boycotts, is off the radar screen at least for the moment," Julius Baer analyst Carsten Menke said.

"The markets are being comforted by recent (trade) developments. That's why equities are high," he said, adding firmer stock markets are keeping gold prices range-bound between $1,450-$1,480.

European shares rose for the second straight session following reports that Washington and Beijing were very close to an initial trade deal. Adding to the positive mood around the trade negotiations was the weekend announcement that China would seek to improve protections for intellectual property rights, a move seen to address a sticking point between the parties.

Investors were still cautious on trade talks, with U.S. and Beijing officials, lawmakers and trade experts saying an ambitious "phase two" trade deal looked less likely.

"There is no major selling in the gold market, which might suggest that people are still sceptical about these developments," Menke said. "They see them as some sort of temporary relief, not a real longer-term solution."

Gold, considered a safe asset in times of political and economic uncertainty, has gained more than 13% this year, mainly due to the tariff dispute and its impact on global economic growth.

Factors including heightened political uncertainty and an only modest acceleration in growth are likely to support investment in gold, Goldman Sachs said in a research note, maintaining its bullish 2020 target of $1,600 per ounce.

Meanwhile investors kept an eye out for U.S. Federal Reserve Chair Jerome Powell's speech later on Monday. He is expected to reiterate a steady outlook for rates after better-than-expected manufacturing output and services activity data on Friday.

Spot gold may test support at $1,455 per ounce, a break below which could cause a fall to $1,440, according to Reuters technical analyst Wang Tao.

Silver fell 0.9% to $16.86 per ounce, after touching its lowest in a week.

Palladium rose 0.6% to $1,786.62 per ounce, having earlier hit its highest since Nov. 8 at $1,789.96. Platinum was steady at $891.34.