Gold extends gains; all eyes on US-China trade talks

BENGALURU: Gold prices rose for a second session on Thursday after the US Federal Reserve held interest rates steady as expected at the end of a two-day policy meeting, while investors awaited US-China trade talks.

Spot gold rose 0.2 per cent to $ 1,307.05 per ounce at 0705 GMT. US gold futures for June delivery rose 0.2 per cent to $ 1,307.60 per ounce.

“The inflation numbers this week did point to a potential acceleration in those (interest) rate hikes… But after the FOMC meeting yesterday that appears to be less likely and so we’re seeing assets such as gold being bought at the back of that,” said ANZ analyst Daniel Hynes.

Non-yielding gold is highly sensitive to rising US interest rates as it becomes less attractive compared with assets that bear interest.

The Fed left its benchmark interest rates unchanged in a target range of between 1.50 per cent and 1.75 per cent. The central bank raised rates in March and forecasts another two increases this year.

Investors also awaited the US-China trade talks between US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He due on Thursday.

“Safe-haven buying has been absent, of late… But there have been some signals for the past few days that the negotiations won’t be as smooth as expected so that would definitely be a focus, particularly now that we have gotten past the FOMC meeting,” Hynes added.

A breakthrough deal to fundamentally change China’s economic policies is viewed as highly unlikely during the two-day meet, though a package of short-term Chinese measures could delay a US decision to impose tariffs on $ 50 billion worth of Chinese exports.

Asian shares slipped on Thursday as hopes waned for real progress in US-China trade talks, while the US dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes this year.

Spot gold may bounce again towards a resistance at $ 1,317 per ounce as it has found a strong support at $ 1,302, according to Reuters technical analyst Wang Tao.

Meanwhile, gold demand posted its weakest start to the year in a decade, the World Gold Council said on Thursday, as prices of the metal stagnated and the threat of rising interest rates led investors to seek better returns elsewhere.

Among other precious metals, spot silver rose 0.2 per cent to $ 16.38 per ounce.

Platinum climbed 0.4 per cent to $ 893.74 per ounce, while palladium was up 0.5 per cent to $ 964.50 per ounce.