Palladium continues its climb to record highs
Gold futures rallied by nearly 2% on Tuesday to log their highest finish since April, as the stock market assumed a defensive stance on the back of the latest round of talks in the U.S.-China trade spat.
Financial markets await the latest trade developments, as discussions resumed Tuesday in Washington. A 90-day tariff truce between the parties is set to end at the start of March. President Trump on Sunday tweeted about the trade talks, saying “Big progress being made on soooo many different fronts!”
Jeff Wright, executive vice president of GoldMining Inc., said he believes “there is continued optimism of the framework for a deal in the coming weeks; although it will probably get pushed past March 1st.”
April gold GCJ9, +0.22% gained $22.70, or 1.7%, to settle at $1,344.80 an ounce. That was the highest most-active contract settlement since April 19, and biggest single-session dollar and percentage gain since Nov. 1, according to FactSet data. The contract settled at a two-week high of $1,322.10 Friday, enough to flip the contract to positive for last week. U.S. markets were closed Monday for the Presidents Day holiday.
“The uncertainty of the trade talks and fears that the U.S. equity market may be running out of steam is creating capital flows into a more protective allocation,” said Peter Hug, global trading director at Kitco Metals Inc.
“The issue with Brexit, which comes to a fore in 5 weeks, has the potential to derail the entire continent, and dealers across the pond are seeing increased physical demand for gold,” he said in a daily note. Traders will also look at the minutes from the Federal Reserve’s January meeting due out Wednesday “to again analyze the Fed’s confirmation of a dovish posture moving forward.”
Gold, typically bought as a haven asset in times of political uncertainty, has seen largely subdued daily moves. Still, Trump’s declaration of a national emergency at the end of last week to pay for a wall along the U.S.-Mexico border prompted 16 states filed a federal lawsuit on Monday challenging the declaration. That may be offering some haven support for gold, said analysts at Zaner Precious Metals.
U.S. benchmark stock indexes edged up in Tuesday dealings, and bond demand pushed down yields.
“Further weakness in government bond yields could underpin the lower-yielding and noninterest-bearing assets such as gold and silver even more profoundly going forward, although equities cannot ignore a deteriorating global economy for too much longer,” said Fawad Razaqzada, market analyst at Forex.com.
Precious metals tend to draw buying in a low interest-rate climate. Rising rates make nonyielding gold less attractive to investors who will chase higher yields elsewhere.
For now, Wright said weakness in the U.S. dollar has helped to support gold. Getting prices for the metal past $1,350 “might be a challenge in the short term but, clearly, momentum is heading towards that level,” he said.
The dollar, as measured by the ICE U.S. Dollar Index DXY, +0.02% was down 0.5% at 96.471. Weakness in the buck can make purchasing dollar-priced assets comparatively less expensive for those using other monetary units.
Among other metals, March silver SIH9, +0.43% rose 22.4 cents, or 1.4%, to $15.967 an ounce. March copper HGH9, +0.73% added 2.7% to $2.875 a pound. April platinum PLJ9, +1.10% rose 1.8% to $821 an ounce.
March palladium PAH9, +0.84% jumped 3.3% to finish at $1,453.90 an ounce, continuing to probe fresh record highs based on FactSet data going back to November 1984. The most-active contract was up 2.6% for last week. Prices for the metal have been climbing to new highs for months now, buoyed by rising demand, particularly from the auto sector, and tight supplies.