PRECIOUS-Gold retreats sharply as U.S.-Mexico deal curbs safe-haven demand

* Speculators raised net longs in gold in week to June 4-CFTC

* China’s trade surplus with U.S. rose to $26.89 bln in May

* U.S. Fed futures price in 2 rate cuts in 2019 (Updates prices)

June 10 (Reuters) - Gold prices skidded 1% on Monday, retreating from a 14-month peak hit in the previous session after an agreement between the United States and Mexico to avert a tariff war crimped safe-haven demand for the metal.

Spot gold was down 1% at $1,327.32 per ounce, as of 0725 GMT. In the previous session, the bullion hit its highest since April 19, 2018 at $1,348.08 an ounce.

U.S. gold futures also fell 1%, to $1,332.10 an ounce.

“Talks between the U.S. and Mexico seem to have smoothened out already and the (gold) market seems to have lost its safe-haven appeal a little bit,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

“However, hopes that the U.S. Federal Reserve will reduce the interest rate are still looking a little positive for gold.”

The United States and Mexico struck a deal on Friday to avert a tariff war, with the latter agreeing to rapidly expand a controversial asylum programme and deploy security forces to stem the flow of illegal Central American migrants.

U.S. President Donald Trump also defended the deal against criticism that there were no major new commitments to stem a flow of Central American migrants crossing into the United States, and said on Sunday more details would soon be released.

Global equities also took heart from Washington’s plans to shelf the imposition of tariffs on Mexico, and as Friday’s weak U.S. jobs data raised hopes for U.S. interest rate cuts.

Expectations that the U.S. Federal Reserve might deliver a rate cut, however, provide a glimmer of hope for gold bulls since lower interest rates increase the opportunity cost for holding bullion.

Fed fund futures now price in more than two 25-basis point rate cuts by the end of this year, with one almost fully priced in by July, especially as weak data from the United States and an unending Sino-U.S. trade spat cloud global economic outlook.

China’s trade surplus with the United States, which has been a major sticking point with Washington, rose to $26.89 billion in May, from $21.01 billion in April, customs data showed.

On Saturday, the chief editor of China’s Global Times newspaper said China was preparing to curb some technology exports to their trade adversaries, thawing hopes of a Mexico-like settlement to the Sino-U.S. trade war.

Speculators also 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.

Elsewhere, silver shed 1.5% to $14.77 per ounce.

Platinum fell 0.4% to $802.91 an ounce, while palladium eased 0.1% to $1,356.25 an ounce. (Reporting by Arijit Bose in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)