PRECIOUS-Gold drops from 14-month high as U.S.-Mexico deal lifts risk assets

* Speculators raised net gold longs in week to June 4 -CFTC
* U.S. Fed futures price in 2 rate cuts in 2019
* GRAPHIC-2019 asset returns: http://tmsnrt.rs/2jvdmXl

(Updates prices)
By Eileen Soreng
June 10 (Reuters) - Gold fell 1% on Monday, retreating from
a 14-month peak hit in the previous session after a deal between
the United States and Mexico to avert a tariff war prompted
investors to ditch the safe-haven metal for riskier assets.
Spot gold XAU= was down 1% at $1,326.50 per ounce as of
1138 GMT. In the previous session, it hit its highest since
April last year at $1,348.08 an ounce.
U.S. gold futures GCv1 fell 1.2% to $1,330.5 an ounce.
The United States and Mexico struck a deal on Friday to
avert a tariff war, with the latter agreeing to expand a
controversial asylum programme and deploy security forces to
stem flows of illegal migrants from Central America.
"The U.S.-Mexico trade breakthrough has improved risk
appetite for investors, as it shows a deterioration in trade war
fears," said Jameel Ahmad, global head of currency strategy and
market research at online forex trading broker FXTM.
"Assets such as gold have fallen ... after what has been a
very good couple of weeks for traditional safe haven assets," he
added.
As long as gold remains above chart support at $1,320 and
$1,300, positive technical momentum should underpin prices,
however, he said.
Expectations that the U.S. Federal Reserve might deliver a
rate cut are currently giving hope to gold bulls. Lower interest
rates cut the opportunity cost of holding bullion, which carries
no yield.
Fed fund futures now price in more than two 25-basis point
rate cuts by year-end, with one almost fully priced in by July.
Weak data from the United States and a Sino-U.S. trade spat are
clouding the global economic outlook.
Speculators raised net long position in COMEX gold in the
week ended June 4, data from the U.S. Commodity Futures Trading
Commission (CFTC) showed on Friday. CFTC/
"We expect prices to hover sideways from $1,300-$1,350 per
ounce in the short term, with risks tilted to the upside," Howie
Lee, an economist at OCBC Bank, said in a note.
Among other precious metals, silver XAG= shed 1.7% to
$14.73 per ounce, having touched a near one-week low of $14.68
earlier in the session.
Platinum XPT= fell 1.4% to $795.32 an ounce, while
palladium XPD= was down 0.2% at $1,354.96 an ounce.