Gold steadied on Monday after jumping 1% in the previous session as progress in US-China trade talks limited further gains, and as caution set in ahead of this week’s U.S. Federal Reserve meeting. Palladium meanwhile continued a record run linked to supply shortages to hit another all-time high. Spot gold was up 0.1% at $1,505.18 per ounce as of 1036 GMT, while U.S. gold futures were 0.2% higher at $1,508.40 per ounce. Traders are watching for further clues on the outlook for monetary policy at the Fed’s Oct. 29-30 meeting, at which the U.S. central bank is widely expected to agree to cut its benchmark interest rates for the third time this year.
According to CME Group’s FedWatch tool, there is a 90.4% chance for a 25 basis point rate cut. “The projections for further cuts are probably helping provide support to gold,” Saxo Bank commodity strategist Ole Hansen said. However, there is “definitely some caution” in the market, he added.
“The fact that we’re seeing volatility being sent lower, stock markets at near record highs especially in United States – that’s reducing the need for gold, at least in the near term.” A retreat in European shares on Monday after five straight days of gains and a drip in the dollar index from a one-week high helped bullion to steady.
U.S. and Chinese officials are “close to finalising” some parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative’s office and China’s Commerce Ministry said. US President Donald Trump last week said Washington was doing well in its trade negotiations with China and that China wants to make a deal “very badly.”
“Gold remains supported by an expected Fed rate cut, but gains could be limited by ongoing trade talks and a probable EU 27 extension which quashes the no-deal Brexit risk,” AxiTrader market strategist Stephen Innes said in a note. European Council President Donald Tusk said that the 27 countries that will remain in the European Union after Britain leaves agreed on Monday to accept London’s request for a Brexit extension until January 31, 2020.
Hedge funds and money managers raised their bullish positions in COMEX gold and silver contracts in the week to Oct. 22, data showed on Friday. Among other precious metals, palladium rose 1.3% to $1,785.64 per ounce, having earlier hit a record high of $1,788.76. The metal, used in vehicle exhaust systems to reduce harmful emissions, has climbed about 41% so far this year on a sustained supply crunch. Silver rose 0.2% to $18.05 per ounce, while platinum was up 0.4% at $929.92 per ounce.