Gold prices settled higher Tuesday, with futures finding support in the wake of losses after the past two sessions, as traders eyed potential progress toward a U.S.-China trade deal and awaited the outcome of the two-day Federal Reserve monetary policy meeting.
Lingering uncertainty about a partial resolution in trade tensions between the U.S. and China has been a main driver for precious metals, but the White House’s suggestions that a deal was close has provided some headwinds for bullion in recent action.
Still, gold bulls make the case that signs that U.S. inflation may be edging up and demand for the hard commodity in Asia have underpinned prices.
February gold on Comex picked up $3.20, or 0.2%, to settle at $1,468.10 an ounce, following losses in the past two sessions. March silver , added 6 cents, or 0.4%, at $16.702 an ounce, following a 0.3% slide in the previous session.
“Gold continues to see some soft haven demand in Asia, but interest remains low. U.S. consumers’ inflation expectations rose slightly in November, bringing the outlook for near and medium-term inflation up from five-year low in the New York Federal Reserve survey has probably kept the bid under gold in Asia,” wrote Stephen Innes chief Asia market strategist at AxiTrader, in a Tuesday note.
The median outlook for U.S. inflation over the next three years rose by 0.1 percentage point to 2.5%, and those for the coming year edged slightly higher, up 0.02 percentage point, to 2.4%, the N.Y. Fed’s recent survey found . Both measures moved up from their lowest levels since 2013.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.51% and the S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.08% traded little changed on Tuesday as gold futures settled. Investors kept an eye on Sino-American trade developments.
The narrative on trade on Tuesday as mixed, with Acting White House chief of staff Mick Mulvaney saying that prospects for “phase one” of a broader trade compromise with China were “pretty good” during a Wall Street Journal CEO Council event in Washington, while Larry Kudlow, moments later at the same event said the Dec. 15 tariffs were “still on the table.”
Meanwhile, the Wall Street Journal reported that Congress is working toward a bill that would bar the use of federal funds to buy Chinese buses and railcars, which could complicate a phase-one trade-deal talks.
Against that backdrop, yields for the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.26% edged higher, moving up to 1.8416% from 1.829% late Monday. Bond prices fall as yields rise. The dollar, as gauged by the ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY +0.10% , however, was off 0.2% at 97.47.
Higher yields can pressure prices for gold, which doesn’t offer a yield, but a weaker U.S. dollar can help to support buying in dollar-priced precious metals.
The Federal Reserve’s two-day policy meeting will conclude on Wednesday. Analysts at ICICI Bank said they “expect the FOMC to maintain status quo on policy rates and its balance sheet program as the economy is showing signs of stabilizing around its trend level.”
“However, we expect the message to remain dovish reflecting concerns about the inflation outlook,” they said.
Among other metals traded on Comex, platinum saw the biggest percentage gains Tuesday, with the January contract up 2.7% at $922.60 an ounce. March palladium added 0.7% to $1,869.10 an ounce. March copper rose 0.3% to $2.7655 a pound.
“So far the palladium market has not shown much in the way of a reaction to news that Chinese auto sales contracted for the 17th straight month, but one would think that would give some pause to a market that has rallied 43% since May,” said analysts at Zaner Metals, in a daily note.
“However, there is a supply-side threat from rolling blackouts in South Africa due to a long neglected and poorly managed public power utility,” they said. “Unfortunately for palladium bulls, the threat against supply is more specific to platinum.”