Gold is holding steady near a five-month peak as expectations for fewer interest rate hikes by the US Federal Reserve next year supported the non-yielding precious metal.
Palladium briefly traded above gold earlier in the session, with prices of the autocatalyst metal rising more than two per cent after US President Donald Trump tweeted that China had agreed to cut import tariffs on American-made cars.
Palladium prices last week briefly surpassed gold for the first time since 2002.
Spot gold was little changed at $US1,243.34 per ounce after touching its highest level since July 11 at $US1,250.55 in the prior session.
US gold futures settled down $US2.20, or 0.18 per cent, at $US1,247.20 per ounce.
‘We are in a situation where the US Federal Reserve is starting to signal they may be very close to neutrality, which means just a few more interest rate hikes,’ said Bart Melek, head of commodity strategies at TD Securities.
‘Over the last few weeks, several speakers from the Fed, including Chairman Jerome Powell, have let the market know that they will be looking at the data when deciding the monetary policy going forward … The market is interpreting this as lower interest rates in 2019 and 2020.’
Lower interest rates reduce the opportunity cost of holding bullion and weigh on the dollar.
Gold investors are awaiting the Fed meeting on December 18-19, where the central bank ‘could have more dovish language and cautious approach to future hikes,’ said George Gero, managing director at RBC Wealth Management.
Speculators trimmed their net short positions in Comex gold contracts in the week to December 4, data showed on Monday.
‘There remains significant scope for the market to further increase long positions and to further reduce short positions,’ Societe Generale said in a note.
‘A weaker dollar, driven by moderating Fed policy, could provide the market with the necessary impetus.’
Among other precious metals, palladium climbed two per cent to $US1,241.40 an ounce.
‘There was some mention of tariff removal by the US President on the autos, that certainly means better demand for vehicles that use palladium and there is a general concern that the palladium market is in a structural deficit,’ Melek of TD Securities said.
Spot silver fell 0.3 per cent to $US14.49 per ounce, having touched $US14.72 an ounce earlier, its highest level since November 7.
Platinum was 0.7 per cent lower at $US779.74 per ounce.
Prices had slipped to their lowest since September 10 at $US773.50 in the previous session.