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Gold futures moved higher on Tuesday, after two days of pressure on assets perceived as risky, including stocks, with anxiety about the lack of a U.S.-China trade deal rising again.
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 assurances that a deal was close has provided some headwinds for bullion in recent action.
However, 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 GCG20, +0.33% on Comex picked up $4.30, or 0.3%, at $1,469.20 an ounce, after settling little-changed on Monday, while March silver SIH20, +0.38%, added 5.3 cents, or 0.3%, at $16.695 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%, for the coming year, the N.Y. Fed’s recent survey found. Both measures moved up from their lowest levels since 2013.
Meanwhile, the Dow Jones Industrial Average DJIA, -0.12% and the S&P 500 index SPX, -0.07% declined on Tuesday as investors kept an eye on Sino-American trade developments.
The South China Morning Post, citing sources familiar, reported that though a partial trade deal may not be reached within this year, tariffs due to kick in on Dec. 15 aren’t expected to be put in place. 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 efforts toward a phase-one trade pact.
Anxieties about the state of trade talks also pushed yields for the 10-year Treasury note TMUBMUSD10Y, +1.33% down to 1.823% from 1.829% late Monday. Bond prices rise as yields fall. And the dollar, as gauged by the ICE U.S. Dollar Index DXY, -0.11%, was off 0.1% at 97.549.
Lower yields and a weaker U.S. dollar can help to support buying in dollar-priced precious metals which don’t offer a coupon.
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 PLF20, +2.70% up 2.6% at $921.50 an ounce. March palladium PAH20, +0.61% added 0.6% to $1,867.90 an ounce. March copper HGH20, +0.18% rose 0.2% 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.”
