Gold prices edge higher as investors watch tariff talks and the Fed

Gold prices edged up Wednesday as uncertainty about international trade policy helped to buttress the yellow metal ahead of the Federal Reserve’s latest policy statement and interest-rate projections of 2019.

The U.S. central bank’s update will be released at 2 p.m. Eastern time, about a half-hour after gold settles for the session. Although no one is expecting significant shifts from the central bank, investors will closely watch for clues on the outlook for monetary policy.

February gold GCG20, +0.42%  on Comex picked up $3.70, or 0.3%, to $1,471.80 an ounce, after a similar rise on Tuesday. March silver SIH20, +0.86%, added 1.8 cents, or 0.1%, to reach $16.72 an ounce, following a 0.4% gain in the last session.

After three interest rate cuts this year, the Fed is expected to keep interest rates unchanged for an extended period as the central bank harbors fears that the U.S.-China trade clashes could hurt the U.S. economy and worsen a slowdown elsewhere in the globe, market strategists say.

Edward Moya, senior market analyst at Oanda, said the “policy decision could open the door for QE4 as the Fed will try to alleviate concerns over strain with repo markets.”

“The promise for more stimulus should be supportive for gold, but the tone of today’s press conference might be too optimistic about the U.S. economy,” he said in a daily note. “If [Fed Chairman Jerome] Powell is too optimistic about the economy and not forthcoming with what the Fed will do eliminate short-term lending pressures, gold could remain trapped in a tight range even after today’s Fed meeting.”

Meanwhile, developments on the China-U.S. trade front have served as an important catalyst for precious metals, keeping the asset trading within a range between $1,470 and about $1,500 over the past several weeks.

Optimism that a trade deal can be achieved as a Sunday deadline for a further increase in China import duties looms, has helped to put pressure on bullion, however.

Still, uncertainty on progress toward a partial U.S.-China trade pact has knocked asset prices around and tempered a recent run-up in risky securities like stocks and oil futures.

White House advisers Larry Kudlow and Peter Navarro have both indicated that tariffs scheduled to hit Chinese goods on Dec. 15 are “still on the table,” following a report from the Wall Street Journal that said both parties were bracing for a delay of a tariff increases on China goods on Sunday, which would be read as an escalation of tensions.

On top of that, the U.K.’s general election is scheduled for Thursday, which could help to determine the course of Britain’s exit from European Union, but a narrowing margin in recent polling for Prime Minister Boris Johnson and his Conservative Party has injected some doubt into the outcome.

“For now, the narrowing the UK election polls is given rise to Brexit uncertainty and is keeping a small bid under gold,” Innes wrote.

Among other metals, March copper HGH20, +0.83%  tacked on 0.8% to $2.878 a pound.

January platinum PLF20, +1.22%  rose 1% to $932 an ounce and March palladium PAH20, +0.56%  climbed 0.7% to $1,882.60 an ounce, poised for a fresh record settlement, buoyed by worries that power outages in South Africa, a key producer of platinum group metals, will disrupt production of the metals.

MarketWatch

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Ed Moya

Ed Moya

Senior Market Analyst - The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geopolitical events and monetary policies around the world. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC and Bloomberg, and is often quoted in leading publications including the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University.
Ed Moya