* Traders see 94% chance for 25 basis point rate cut by Fed
* Palladium hovers near all-time high of $1,808.81/oz (Updates prices)
By Asha Sistla
Oct 29 (Reuters) - Gold fell to a one-week low on Tuesday as hopes for a U.S.-China trade deal buoyed risk sentiment, while gold investors will watch how other financial markets react to this week’s Federal Reserve meeting at which the central bank is widely expected to cut U.S. interest rates.
Spot gold was down 0.3% at $1,487.54 per ounce as of 02:02 p.m. EDT (1802 GMT). U.S. gold futures settled 0.3% lower at $1,490.70 an ounce.
“Gold is still down due to the general positive tone in the markets right now regarding the U.S.-China trade war and Brexit,” said Chris Gaffney, president of world markets at TIAA Bank, adding an expected interest rate cut by the Fed could lift gold back above $1,500.
U.S. President Donald Trump said on Monday he expected to sign a significant part of the trade deal with China ahead of schedule, boosting risk appetite. On Monday, the S&P 500 stock index jumped to a record high.
Washington was also considering an extension on tariff suspensions on $34 billion of Chinese goods.
The Fed meets on Tuesday and Wednesday, and investors see a 94% chance for a 25 basis point rate cut. The U.S. central bank has already lowered interest rates twice this year.
“The question is how much emphasis (Fed Chair Jerome) Powell will put on slowdown in global growth - if he really emphasises on that, the markets would think the rates could go lower, boosting gold,” said TIAA Bank’s Gaffney.
Lower interest rates make gold attractive as it reduces the opportunity cost of holding the metal.
“The bullish case for gold is still intact; it’s likely to be in a larger $1,485-$1,525 range for the next month or so,” said George Gero, managing director at RBC Wealth Management.
Palladium was down 1.1% at $1,780.17 per ounce, a day after hitting a record high of $1,808.81 on a supply shortage.
“The market is in its eighth consecutive deficit year and is likely to stay in the ninth consecutive deficit year next year as well as supplies are not really growing,” UBS commodity analyst Giovanni Staunovo said.
Silver shed 0.3% to $17.81 per ounce, while platinum was steady at $918.79. (Reporting by Asha Sistla in Bengaluru; Editing by David Gregorio and Richard Chang)