The price of gold fell below the threshold of $4,000 an ounce, extending the losses recorded after the strongest correction in the last decade, amid progress in trade negotiations between the US and China, notes Bloomberg. Spot gold fell as much as 3.2% to below $3,990 an ounce after last week's spectacular rally in the precious metal came to an abrupt halt amid concerns that the record appreciation had been too quick and too wide. A trade deal between the world's two largest economies could reduce the economic risks and geopolitical tensions that have previously supported gold's rise. The strong rally that propelled gold to a record high of more than $4,380 an ounce on Monday last week quickly reversed amid signs that the market was overvalued. «Gold is going through a long-awaited correction, currently driven by the positive news regarding trade negotiations,» said Ole Hansen, head of commodities strategy at Saxo Bank. «We may have already seen the top for this year, and a larger correction could take longer to recover as traders become more cautious while the stock market continues to rise.» Nearly 1,000 professional gold traders and brokers gathered in Kyoto, Japan for the London Bullion Market Association's (LBMA) annual conference. Participation is at a record level, reflecting the increasing competitiveness for precious metals trading specialists. Demand from central banks is no longer as strong as in the past, and a deeper correction could be beneficial for the market, said John Reade, market strategist at the World Gold Council, at the LBMA event. He mentioned that, according to the discussions at the conference, a level of 3,500 dollars an ounce would be considered «healthy for the gold market, because, even so, it would remain an exceptionally high price». This week marks a busy one for central bank decisions, with the Federal Reserve (Fed), European Central Bank (ECB) and Bank of Japan (BoJ) scheduled to announce monetary policy decisions. The Fed is expected to cut the benchmark interest rate by 25 basis points, while the ECB and BoJ will keep interest rates unchanged. Lower interest rates tend to support the price of gold, as the precious metal does not provide a return in the form of interest.
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