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Gold prices drop to a new low after trade optimism increases

The gold price dropped by more than 2%, reaching a new low of over a month, as investors shifted away from bullion due to rising risk appetite.

As of 1011 ET (14.10 GMT), spot gold fell to its lowest level since April 11 and dropped 1.8% to $3.188.52 per ounce. Bullion dropped as low as $3.174.62 in an earlier session.

U.S. Gold Futures declined 1.7% to $3192.80.

Tai Wong is an independent metals dealer. He said, "The global relief rallies sparked by steep reductions in U.S. - China tariffs have triggered a corrective movement through technical levels of gold."

Wall Street's major indexes began higher on Monday, with the deal over tariffs and expectations for more trade agreements driving their gains.

Washington and Beijing have agreed to drastically reduce tariffs and adopted a 90 day pause as the details are worked out.

In an interview with CNN on Tuesday, Donald Trump said he would be willing to negotiate directly with Chinese President Xi Jinping about the details of a new trade agreement. He said "potential deals", with India, Japan and South Korea are in the works.

Last month, gold, a precious metal that is considered a safe place in times of economic and geopolitical turmoil, reached a new record of $3,500.05. Prices have risen by 21.6% this year.

Fawad Rasaqzada is a market analyst for City Index and FOREX.com. He said: "While the trend in the long term remains bullish, it wouldn't surprise me if the momentum continued to be bearish for a couple of more days."

The first target for the downside is $3,136. Next, it's $3,073 then $3,000, and finally, the biggest level.

After softer than expected consumer data, traders are now waiting for the U.S. Producer Price Index (PPI) to be released on Thursday. This will provide clues as to the Federal Reserve's policy direction.

As a zero-yielding investment, lower interest rates make bullion more appealing.

Silver spot fell by 1.8%, to $32.29 per ounce. Platinum dropped 0.5%, to $983.42. Palladium increased 0.1%, to $957.65. (Reporting by Sarah Qureshi in Bengaluru; Editing by Tasim Zahid)

(source: Reuters)