Expectation of fewer US rate hikes supports gold

Bengaluru — Gold prices were firm on Wednesday, supported by the expectation of fewer rate hikes by the US Federal Reserve in 2019, while palladium traded at a premium to the metal.

Spot palladium was up 0.3% at $1,246.72/oz, as of 4.41am GMT, having climbed 2% in the previous session after China agreed to cut tariffs on US-built cars and car parts to 15% from the current 40%.

Spot gold was up 0.1% at $1,243.60/oz, while US gold futures rose 0.2% to $1,249.8/oz.

Gold is moving sideways given the uncertainties around the pace of Fed rate hikes, the Brexit deal and US-China trade talks, said Brian Lan, MD at dealer GoldSilver Central in Singapore.

The Fed is widely expected to raise rates at its December 18-19 meeting, but the market is focusing on how much further it might lift rates in 2019, after recent comments by Fed members to decide the monetary policy based on data have been taken as a signal for lower rate hikes in 2019.

Investors also kept a close eye on developments surrounding Brexit as an attempt to oust British Prime Minister Theresa May by her conservative party gathered pace on Tuesday, after a Brexit deal vote was postponed.

“In ETFs [exchange-traded funds], we have seen positive flows into gold, these are some of the indication that perhaps the safe-haven status of gold is back,” said Lan, adding that gold prices could be testing $1,260 into year-end.

Indicative of investor sentiment toward the bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.43% to 763.56 tons on Tuesday, the highest since late August.

“We are very close to the 200-day moving average at $1,255.… It seems to be capping gold for the time being,” said a Hong Kong-based trader.

Spot gold is biased to retest a resistance at $1,253/oz, a break above which could lead to a gain into a range of $1,258-$1,266, according to Reuters technical analyst Wang Tao.

Among other precious metals, spot silver was up 0.3% at $14.57/oz.

Platinum was 0.1% higher at $782.40/oz.

Reuters