Gold Prices Slipped Ahead of Dispute Talks

Inflows into China's gold reserves top 100 tons in this current spree. Image Carla Gottgens  Bloomberg

United States gold futures inched 0.1 per cent higher to US$1,513.90 an ounce.

Gold prices eased on Monday as the dollar firmed after a report said China was reluctant to agree to a broad trade deal with Washington, but bullion held a tight range as investors took a wait-and-see approach ahead of US-China talks this week.

Hopes that China and the USA would resolve their longstanding trade dispute were quickly dashed after Beijing's top negotiator narrowed the scope for upcoming trade talks.

Spot gold was up 0.4% at $1,499.67 per ounce at 01:37 p.m. EDT (1737 GMT) after rising as much as 1% to $1,508.31 earlier in the session.

On the European front, the prospects of an orderly Brexit seemed dim as a British source said that German Chancellor Angela Merkel told Prime Minister Boris Johnson by phone that a deal was "overwhelmingly unlikely".

"If we do see a full collapse (in trade talks) unexpectedly, that will lead to a lot of risk aversion which could be the bullish catalyst gold needs", Erlam said, adding that there was a lot of uncertainty over the Fed minutes as well.

The previous high dated back to late 2012, at which time the gold price was near$1,700 per ounce, 18% higher than now.

More news: UK Sees Brexit Deal as Almost Impossible as EU Lashes Out

Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer are set to resume top-level trade talks on Thursday, ahead of a scheduled increase in U.S. tariffs on $250 billion worth of Chinese goods on October 15.

Traders were also looking ahead to the minutes of the Federal Reserve's recent policy meeting to know the central bank's outlook about future interest rate cuts. By contrast, European investors, who had bought earlier against a backdrop of Brexit concerns and the European Central Bank's negative interest rates, added only 7.7 tons.

Despite the bearish correction of gold prices, there are still factors supporting the return of gains at any time.

However, limiting gold's advance, the dollar climbed to a near one-week high on Tuesday, making bullion more expensive for holders of other currencies.

Holdings of the world's largest gold-backed ETF, SPDR Gold Shares, held close to their highest in almost three years at about 923.76 tonnes.

December silver, meanwhile, gained 0.9% and finished at $17.70 an ounce, after dipping 0.5% in the last session.

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