Gold clawed back some losses after plunging below $4,000 an ounce on Monday as progress in US-China trade talks sapped demand for haven assets.

Bullion edged higher on Tuesday after tumbling 3.2% in the previous session as negotiators from Washington and Beijing said they'd struck a series of agreements on issues including tariffs and export controls. Treasuries moved lower even as traders stuck to bets that the Federal Reserve is set to loosen monetary policy this week, with the higher yields weighing on demand for non-interest bearing gold. 

Gold has pulled back decisively from a record above $4,380 an ounce last Monday following a blistering rally. It's still up more than 50% this year, with central-bank buying and the debasement trade — in which investors avoid sovereign debt and currencies to protect themselves from runaway budget deficits — providing support and attracting retail investors.  

"Crowded longs can unwind quickly when leveraged traders rush to lock in profits," Chris Weston, head of research at Pepperstone Group Ltd., said in a note. "While gold continues to make lower lows and futures volumes remain elevated on down days, calling the bottom is a tough ask."

Gold's rapid rise — and recent retreat — has been a hot topic of conversation at the London Bullion Market Association's precious metals conference in Kyoto. Central bank demand isn't as strong as it was, and a deeper correction might be welcomed by professional dealers, John Reade, a market strategist at the World Gold Council, said on Monday at the event — the biggest annual gathering for the industry. 

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The US's shift toward deal-making with China, alongside a shift in gold-price momentum and a possible end to the US government shutdown, is set to propel the metal lower over the coming days and weeks, Citigroup Inc. analysts including Max Layton said in note on Monday. The bank sees bullion falling to $3,800 an ounce in the next three months.

Spot rose 0.5% to $4,000.81 an ounce as of 7:54 a.m. in Singapore. The Bloomberg Dollar Index dipped 0.1%. Silver edged higher, after losing 3.7% on Monday. Platinum was flat, while palladium climbed.

Fed policymakers are widely expected to lower rates by 25 basis points at their two-day policy meeting, which finishes Wednesday, which would be the second such move in a row.

The market is also weighing a list of five finalists to succeed Fed Chair Jerome Powell, who is due to leave his post in May next year. Treasury Secretary Scott Bessent confirmed the candidate pool has narrowed to current Fed board members Christopher Waller and Michelle Bowman, former Fed Governor Kevin Warsh, White House National Economic Council Director Kevin Hassett and BlackRock Inc. executive Rick Rieder. 

Source: Bloomberg