Gold edges upward, but palladium still shines brighter

Bengaluru — Gold edged higher on Thursday as growing risk aversion weighed on the dollar, while palladium held ground at a premium to the bullion.

Spot gold was up 0.2% at $1,239.86 an ounce, as of 4.29am GMT, while US gold futures were 0.2% higher at $1,244.9 an ounce.

“Markets are trying to consolidate, trying to push up higher for now,” said Benjamin Lu, a commodities analyst with Phillip Futures.

A balance between a host of factors such as a rate hike by the US Federal Reserve in December, uncertainty about trade tensions between Washington and Beijing, and a flattening yield curve has helped create a premium for the bullion, Lu added.

Fed policymakers will gather at a December 18-19 meeting, at which the central bank is widely expected to raise interest rates.

“Although a rate hike is already priced in, markets will be closely watching the meeting for clues on rate hike timings in 2019,” said Lukman Otunuga, a research analyst at FXTM, adding that: “if the meeting echoes a similar message to (chairman Jerome) Powell’s dovish shift, gold has the potential to shine into 2019.”

The dollar declined against the safe-haven yen as a spike in risk aversion pressured equities and US Treasury yields. The spread between the two-year and five-year Treasury yields inverted this week and the two-year/10-year spread was at its flattest in more than a decade amid a sharp fall in long-term rates.

“A yield-curve inversion indicates higher borrowing cost in short term, so for safe-haven assets in the longer run it’s going to be very positive,” Phillip Futures’ Lu said.

Spot gold may test a resistance at $1,245 an ounce, a break above which could lead to a gain into a range of $1,253-$1,258, according to Reuters technical analyst Wang Tao.

Meanwhile, palladium continued to be more valuable than gold after outshining the yellow metal for the first time since 2002 on Wednesday, with prices soaring by about 50% in less than four months to record levels.

Spot palladium rose 0.1% to $1,245.00 an ounce, hovering near its record-high hit in the previous session.

The market now awaits Friday’s US non-farm payrolls data for November, which is expected to show unemployment remains at 3.7%.

“Investors are seen adopting a cautious stance ahead of the US jobs report which could offer insight over the health of the US labour force,” said FXTM’s Otunuga.

Among other metals, silver fell 0.7% to $14.41 an ounce, while platinum extended losses into a third session, declining 0.7% to $795.00 an ounce.

Reuters