PRECIOUS-Gold falls 1% as U.S.-Mexico deal lifts risk sentiment

(Updates prices)
* 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

By Karthika Suresh Namboothiri
June 10 (Reuters) - Gold prices dropped more than 1% on
Monday, slipping from a 14-month peak, after U.S. President
Donald Trump's decision not to impose trade tariffs on Mexico
spurred risk sentiment and lifted the dollar from recent lows.
Spot gold XAU= dipped 1.1% to $1,326.13 per ounce as of
1:38 p.m. EDT (1738 GMT). The metal had hit $1,348.08 an ounce
in the previous session, its highest since April last year.
U.S. gold futures GCcv1 settled 1.2% lower at $1,329.3 per
ounce.
"Global equities are rallying across the board and we are
seeing liquidation on safe haven demand," said Phillip Streible,
senior commodities strategist at RJO Futures. "Gold futures are
backing off and the dollar index is rallying and prices are
burdened with the Mexico tariffs."
The United States and Mexico struck a deal on Friday,
averting a potential tariff war, after Mexico agreed to
cooperate in curbing the flow of illegal Central American
migrants. Markets worldwide were quick to cheer the deal, with MSCI's
index of stocks across the world .MIWD00000PUS up more than
1%, and Wall Street set to begin the week well. The dollar index
.DXY also gained, after dropping to a two and half month low
in the previous session. USD/ MKTS/GLOB
"Trader and investor attitudes are more upbeat to start the
trading week after the U.S. and Mexico late Friday reached a
deal," said Jim Wyckoff, senior analyst at Kitco in a note.
"However, progress on the U.S.-China trade war front remains
elusive amid no signs the world's two largest economies are
coming closer to any agreement on trade matters"
Gold prices were still supported above key technical levels
as investors see high probability that the U.S. central bank
will cut interest rates this year. Lower interest rates reduce
the opportunity cost of holding non-yielding bullion. 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 U.S. economic data and the Sino-U.S. trade dispute are
clouding the global economic outlook.
"Gold futures will continue to rise, so long as the yield
curve continues to remain inverted. I'd like to see gold remain
above $1,320, with $1,310 being a critical support level,"
Streible added.
Reflecting increased investor interest in gold, speculators
raised their net long position in COMEX gold in the week ended
June 4, data showed on Friday. CFTC/
Palladium XPD= erased the day's losses to jump nearly 2%
to $1,383.50 per ounce, taking cues from gains in the automotive
sector, whose operations in Mexico and the United States are
strongly intertwined. Meanwhile, platinum XPT= shed 0.7% to $800.50 per ounce,
while silver XAG= dropped 1.6% to $14.76 per ounce.