(Bloomberg) -- Gold edged higher as the dollar weakened, but the precious metal is still set for its first back-to-back weekly loss this year, as haven appeal eased on signs of a thaw in the U.S.-China trade war.
Gold rose 0.8 per cent, while a gauge of the greenback fell 0.6 per cent. A weaker dollar tends to benefit gold, making it cheaper for buyers in other currencies.
The past two weeks have seen the precious metal’s haven appeal fade somewhat, as risk appetite returned to Wall Street on strong tech earnings and economic data caused traders to curb their bets on U.S. interest-rate cuts. Most importantly of all, China has said it is assessing the possibility of trade talks with the US, the first sign since Donald Trump hiked tariffs last month that negotiations could begin between the two sides.
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On Thursday a report showed manufacturing activity shrank in April at a pace that slightly surprised to the upside. Markets pared wagers on the size of the Federal Reserve’s easing trajectory this year, with the first quarter-point rate reduction fully priced in for July. Both higher rates and yields tend to weigh on non-interest bearing gold.
Despite this week’s sharp selloff, gold is up about a quarter this year and hit a record above $3,500 last week before losing some ground amid signs the rally was overheated. The ascent has been driven by investors taking refuge in the haven asset on mounting fears that unconventional policies from the White House could slow the global economy.
Speculative demand in China and central-bank buying has also supported gains.
Traders will on Friday weigh a US jobs report, the last piece of significant data this week.
Spot gold rose to $3,263.45 an ounce as of 10:42 a.m. in London, and is down 1.7 per cent this week. The Bloomberg Dollar Spot Index fell 0.6 per cent. Platinum and palladium were steady, while silver rose.
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