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Gold drops as Trump backs off tariff threats and the Fed is cautious about rate cuts

Gold prices fell on Tuesday, after U.S. president Donald Trump said that not all his tariffs will take effect on the 2nd of April. This boosted risk sentiment and a Federal Reserve official indicated a cautious approach to rate cuts in 2018.

As of 0224 GMT, spot gold was down by 0.1%, at $3,010.64 per ounce. U.S. Gold Futures were unchanged at $3,015.00.

Gold prices have been on the decline recently as improved risk appetite, a softer U.S. trade rhetoric and a recent surge in gold's price has led to some profit-taking.

Trump announced on Monday that automobile tariffs will be implemented soon, even though he said that some of the levies he had threatened would not be implemented on April 2, and that certain countries might get a break. Wall Street interpreted this as a sign that he was showing flexibility in a matter which has been roiling markets for weeks.

Gold continues to be a good hedge against any surprises.

Raphael Bostic, president of the Atlanta Federal Reserve, said Monday that he expects a slower pace of inflation in the months to come. As a result, he sees the Fed reducing its benchmark rate by only a quarter percentage point this year.

Bullion is often seen as a hedge to geopolitical or economic uncertainty. It thrives when interest rates are low.

The Fed's preferred measure of inflation, the Personal Consumption Expenditures Index (PCE), is due Friday.

Funds that invest in gold mining companies are expected to receive their largest monthly net inflows since more than a full year in March as the record high gold prices boost profit forecasts and cash flow.

Spot silver increased 0.2%, to $33.04 per ounce. Platinum fell 0.1% to $972.25. Palladium remained flat at $951.45.

(source: Reuters)