Gold holds steady, while palladium hits record high

Bengaluru — Gold prices held steady on Wednesday as a potential close to a months-long China-US trade war lifted risk sentiment, countering expectations that the Fed would pause interest rate increases for this year.

Meanwhile, palladium hit a record high at $1,340.50/oz during the session.

Spot gold slipped 0.2% to $1,282.97/oz by 4.04am GMT, and US gold futures settled down 0.1% at $1,284.5/oz.

“In the short term, there is some optimism that there will be a trade truce, which will take away a shadow from market confidence,” said Benjamin Lu Jiaxuan, a commodities analyst at Phillip Futures.

However, gold is seeing some headwind because of a gradual recovery in risk assets, as well as investors pricing in the US Federal Reserve’s dovish signals, he added.

Asian shares climbed to a three-and-a-half-week high in early trade on optimism that Washington and Beijing could strike a trade deal to avoid an all-out confrontation that would severely disrupt the global economy.

The rally in riskier assets has accelerated since last Friday, when Federal Reserve chair Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year.

“With Fed clearly indicating that they would be receptive to the developments in the financial markets and there is a clear emerging consensus that there may not be any rate hikes, it could be a tailwind for gold,” said Hitesh Jain, the vice-president of Yes Securities.

“But, the ETF [exchange-traded funds] flows are not still, not bounding. On the sovereign front, there are lots of central banks buying gold. Once we see a momentum on the ETF front, that would be an inflection point for gold to move up.”

SPDR Gold Trust, the world’s largest gold-backed ETF, said its holdings fell 0.03% to 796.53 tons on Tuesday from 796.78 tons on Monday.

Markets also await the release of minutes from the Federal open market committee’s December 18-19 policy meeting at 7pm GMT for cues on future interest rate increases.

“Sizing up the technical picture, a top may be taking shape in gold already,” said Ilya Spivak, a currency strategist at DailyFX.

“A daily close below initial support at $1,282.27 opens the door for a test of the $1,257.60-$1,266.44 area.”

Standard Chartered, in a note, said that the demand for palladium remained robust, but there were signs of weakness.

“The recent rally appears to be investor-led rather than reflecting a further significant tightening in fundamentals,” Standard Chartered said.

Silver fell 0.4% to $15.59/oz and platinum was up 1% to $822.70.