Easing trade tensions between US and China weigh on gold

Gold prices were down 0.4% on Wednesday as easing trade tensions reduced demand for the safe-haven asset.

A recent executive order from the White House outlined plans for the United States to cut tariffs on cheap goods imported from China. This move mitigates the risks of a worsening trade conflict between the two largest global economies.

President Donald Trump said Monday that duties on Chinese imports are unlikely to return to their previous high of 145% after a 90-day pause. He was optimistic about striking a trade deal with Beijing. 

Meanwhile, the US Labor Department reported that the Consumer Price Index (CPI) rose 0.2% in April, falling short of a Reuters forecast for a 0.3% hike after a 0.1% decline in March. 

Investors are now looking forward to the release of the Producer Price Index data on Thursday, which will provide insight into the Fed’s future monetary stance. The central bank is now projected to cut rates by 53 basis points over the course of the year, starting in September.

Gold, traditionally known as a hedge against inflation, tends to benefit in a low interest rate environment, Reuters notes.