Investing.com - Gold prices backed away from five-week highs on Tuesday as the dollar pushed higher and risk appetite was revived by hopes that the threat of a trade war between the U.S. and China could be averted.
Gold futures for April delivery on the Comex division of the New York Mercantile Exchange slipped $3.4 or 0.26% to $1,351.70 a troy ounce by 04:40 AM ET (08:40 GMT).
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.23% to 88.84 from an overnight low of 88.57, which was the weakest since February 16.
Gold prices rose to a five-week high of $1,356.70 overnight buoyed by a weaker dollar and heightened tensions between Russia and the West, even as concerns over trade friction between Beijing and Washington subsided.
Prices of the precious metal were boosted after the U.S. said it would expel 60 Russian diplomats, joining a coordinated global response punishing the Kremlin following a nerve agent attack on a former Russian spy in Britain.
Russian Deputy Foreign Minister Sergei Ryabkov said on Tuesday that Moscow would respond harshly to the measures.
Meanwhile, fears over the prospect of an all-out trade war between the U.S. and China eased following reports on Monday that the two sides were negotiating to resolve the issue behind the scenes.
Reports of talks eased concerns that trade tensions between the world’s two largest economies could escalate out of control and whetted investor appetite for riskier assets.
Recent worries that protectionist trade policies from the U.S. and China might result in a trade war have boosted gold, amid fears over the impact on global economic growth.
Investors seek out gold as a store of value during times of political or economic uncertainty, while a weaker dollar makes the dollar-denominated metal cheaper for holders of other currencies.
Indications last week that the Federal Reserve is likely to stick to its plan for gradual interest rates increases and is still projecting three rate hikes this year supported gold, which struggles to compete with yield-bearing assets when interest rates rise.
In other precious metal trade, silver futures were up 0.34% at $16.735 a troy ounce, while platinum futures advanced 0.74% to $963.50.
Among base metals, copper futures were up 1.08% to $3.002 a pound, extending a recovery from Monday’s three-month lows of $2.938.
Recent trade fears had pressured prices to their weakest levels since December after they hit a nearly four-year high late last year.