Gold fell on Tuesday ahead of the much awaited signing of an interim U.S.-China trade deal that dampened the appeal of bullion, while palladium notched a record high on a sustained supply deficit.
"The main thing is that a week ago we had the Iran-U.S. news, that caused a pretty significant rally in gold; and now that news has subsided," said Bob Haberkorn, senior market strategist at RJO Futures. "The U.S.-China deal is also supposed to get signed tomorrow. So, the fact that two big drivers for gold in the geo-political front have kind of come and gone, so gold sold off here."
Gold prices came off their lows after a Bloomberg News report said U.S. tariffs targeting Chinese goods will stay on through the 2020 election even as both sides get ready to sign a "Phase One" trade deal.
Bullion rose to its highest in nearly seven years last week on worries over a potential U.S.-Iran military conflict, but the rally faded in the absence of any escalation in tensions. Analysts said investors are still taking profits after the massive spike in prices.
"That has also been noted in the exchange-traded funds market, where there have been some quite sizeable reductions since we reached that high," Saxo Bank's Ole Hansen said.
Signaling a further ramp down in trade tensions, the U.S. Treasury on Monday dropped China's designation as a currency manipulator, fuelling market optimism. Global equities markets stalled near record highs ahead of the signing of the trade deal.
U.S. consumer prices rose slightly less than expected in December and monthly underlying inflation pressures retreated, which could allow the U.S. central bank to keep interest rates unchanged at least through 2020.
Also on investors' radar is the Federal Reserve's Beige Book, a summary of commentary on economic conditions, due on Wednesday.
Palladium hit a record high of $2,191.60 an ounce, and was on track for a ninth straight session of gains.
The auto-catalyst was up 2.7% at $2,189.77. For 2020/21, "we forecast heavy structural supply/demand deficits for palladium," James Steel, chief precious metals analyst at HSBC, wrote in a note. "Likely robust automotive demand will help keep the market tight. Tighter emissions regulations globally imply heavier palladium auto catalyst loadings."
Silver was down 1% at $17.78 after hitting its lowest since Dec. 24 at $17.64, while platinum rose 0.9% to $982.26.