Following Monday's impressive rally that carried it above the critical $1300 handle on Monday, the XAU/USD pair struggled to preserve its momentum today and was last seen trading at $1298.50, losing 0.1% on a daily basis.

With China announcing its decision to impose tariffs on $60 billion worth of U.S. products, the flight-to-safety continued to dominate the market action on Monday and helped the precious metal find demand as a traditional safe-haven. Today, however, U.S. President Trump sounded fairly optimistic on the possibility of making a deal with China in a Twitter thread and allowed risk-appetite to return to markets.

"When the time is right we will make a deal with China," Trump said and added: "We have to be allowed to make up some of the tremendous ground we have lost to China on Trade since the ridiculous one-sided formation of the WTO. It will all happen, and much faster than people think!"

Reflecting the improving market sentiment, Wall Street started the day in the positive territory on Tuesday. Additionally, the 10-year T-bond yield is posting small recovery gains today, keeping the pair's upside limited by lifting the US Dollar Index higher toward mid-97s.