Gold held steady near $4,000 an ounce, as traders weighed a US-China trade truce that failed to quell concerns about a long-term rivalry between the world's two largest economies.

Spot gold pared losses after falling as much as 0.9% an ounce on Friday during Asian trading hours. Chinese leader Xi Jinping called for stable supply chains in his first public speech after meeting with US President Donald Trump.

The talks between the two leaders appeared to resolve—for now—the months-long dispute, but the one-year pause will likely only stabilize relations and give each side time to reduce strategic interdependence.

The easing of tensions also underscores China's growing economic influence since Trump's first term as US president, a shift that has fueled interest in safe-haven assets.

Bullion headed for its second weekly decline and is down about 8% from its record high above $4,380 on October 20. The recent decline has been aided by diminishing expectations for further Federal Reserve interest rate cuts. Chairman Jerome Powell warned that investors should temper expectations for a December rate cut after a quarter-point cut on Wednesday.

Outflows from gold-backed exchange-traded funds have also removed some of the support underpinning the fiery rally: Total holdings of gold ETFs fell for six days through Wednesday, the longest losing streak since April, according to data compiled by Bloomberg.

"The combination of hawkish tapering, a truce in the U.S.-China trade war, plus large outflows from gold ETFs all add up to a corrective mood," said Robert Rennie, a commodities analyst at Westpac Bank Corp. Bullion could fall back to around $3,750, he said.

Despite the recent decline, gold is still up more than 50% this year, supported by a push by mainstream investors to hedge their portfolios against risk and accelerated central bank buying, the World Gold Council said in a report on Thursday. Central banks bought 28% more gold in the third quarter than in the previous three months, reversing the downward trend seen earlier this year.

Spot gold fell 0.6% to $4,001.63 an ounce as of 9:50 a.m. in London. The Bloomberg Dollar Spot Index rose 0.2%. Silver, platinum, and palladium all fell.

"Uncertainty has crept back into the market following the renewal of the U.S.-China trade truce, which should provide dip buyers with added support for gold for the remainder of the year," said Nick Twidale, chief market analyst at AT Global Markets in Sydney. The metal's recent correction may have ended, he said. (alg)

Source: Bloomberg