Gold steadies ahead of Fed verdict; trade optimism limits upside

Gold prices inched higher on Wednesday, ahead of a widely expected interest rate cut from the Federal Reserve, although easing US-China trade tensions kept bullion strength in check.

Spot gold was up 0.2% at $3,957.42 per ounce, as of 0257 GMT, after dropping to its lowest point since October 7 on Tuesday.

U.S. gold futures for December delivery eased 0.3% to $3,971.20 per ounce.

“The fuel for this short-term correction in gold is a readjustment of safe-haven instrument towards more response instrument like global equities due trade optimism,” OANDA senior market analyst Kelvin Wong said.

“In the near-term gold faces downside pressure due to position adjustment from short-term leverage players and technical levels that’s being breached. However, the fundamentals are still bullish for gold.”

Top Chinese and U.S. economic officials over the weekend hashed out the framework of a trade deal for U.S. President Donald Trump and his Chinese counterpart Xi Jinping, that would pause steeper American tariffs and Chinese rare-earths export controls.

Trump and Xi are set to meet in South Korea on Thursday.

“Progress in U.S.-China trade talks continues to sap demand for haven assets such as gold, which extended a pullback as tension eased … The recent declines may provide an opportunity for central banks to ramp up purchases,” ANZ said in a note.

Meanwhile, the Fed is widely expected to cut interest rate by a quarter-percentage point at the end of its policy meeting on Wednesday, and investors are watching out for any forward-looking language from Fed Chair Jerome Powell.

The European Central Bank is expected to leave rates unchanged at its policy meeting on Thursday.

Non-yielding gold thrives in a low-interest-rate environment and during economic uncertainties.

Gold prices have climbed about 52% year-to-date, reaching an all-time peak of $4,381.21 on October 20, bolstered by geopolitical and economic uncertainties, rate-cut bets and sustained central bank buying.

Elsewhere, spot silver gained 0.7% to $47.35 per ounce, platinum fell 0.7% to $1,574.25 and palladium eased 0.2% to $1,391.07.