Gold holds close to 10-month highs and palladium remains at record high

Bengaluru — Gold prices hovered near 10-month highs on Tuesday as optimism around US-China trade discussions dimmed the dollar’s appeal, while palladium struck a record high on supply concerns.

Spot gold slipped 0.2% to $1,323.81/oz as of 4.48am GMT. The metal had touched $1,327.64/oz in the previous session, its highest since April 25.

US gold futures rose 0.4% to $1,326.8/oz.

A new round of talks between Beijing and the US to resolve their trade spat will take place in Washington later in the day, with follow-up sessions at a higher level in the course of the week.

“If there is progress in trade talks there will be increasing appetite for emerging-market currencies, and the US dollar will weaken,” Argonaut Securities analyst Helen Lau said, adding that the dollar will lose its safe-haven appeal, which will be supportive of gold.

US President Donald Trump had said last week he might extend the March 1 deadline for a deal and keep tariffs on Chinese goods from rising.

The dollar index against its peers was a shade weaker at 96.881. US financial markets were closed on Monday for Presidents’ Day.

Also supporting gold prices is the US Federal Reserve’s dovish approach to monetary policy tightening, which reduces the cost of holding gold, said John Sharma, an economist with National Australia Bank.

Gold prices have gained 3.3% so far in 2019 on the hope that the world’s two largest economies will hammer out a trade deal and on the expectation the Fed will pause its cycle of interest rate hikes.

Minutes of the Fed’s last policy meeting are due on Wednesday and should provide more guidance on the likelihood of rate increases in 2019.

Meanwhile, a coalition of 16 US states led by California sued Trump’s administration on Monday over his decision to declare a national emergency to obtain funds for building a wall along the US-Mexico border.

Spot gold may test a resistance at $1,331/oz, a break above which could lead to a gain to the next resistance at $1,343, according to Reuters market analyst Wang Tao.

“Gold prices have inched up and consolidated above $1,325. Softer economic prospects are likely to put some pressure on interest-bearing assets,” said Benjamin Lu, an analyst with Singapore-based Phillip Futures.

Among other precious metals, palladium notched a fresh peak of $1,471/oz.

A supply deficit in the market has boosted demand for the autocatalyst metal, in the backdrop of stricter emissions standards.

Platinum rose 0.2% to $803.50/oz, after touching $807.5 earlier in the session, its highest since February 6.

Silver fell 0.4% to $15.73/oz.

Reuters