Gold firms on doubts over Fed rate path; focus on G20

Gold firmed on Monday, supported by uncertainty over the future pace of U.S. interest rate hikes and the outcome of the G20 summit later this week when global leaders will focus on trade tensions.

Spot gold was steady at $1,222.42 per ounce at 1:30 p.m. EST (1830 GMT). U.S. gold futures settled down mostly unchanged at $1,222.40 per ounce.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping are expected to discuss their trade dispute at the G20 summit in Argentina, which begins on Friday.

"If Trump and Xi can't come to an agreement at the G20 meeting, I think you will see a pause in the U.S. Federal Reserve's rate increases next year ... which in turn will help gold prices go higher," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.

Uncertainties related to Brexit and Italy are also helping build a base for gold, which was helped by a slight retreat in the dollar earlier in the session, he added.

The euro gained against the dollar on signs Italy may cut its budget deficit target to satisfy the European Union, while the sterling rose after the EU and Britain sealed a Brexit deal.

Analysts remain cautious, however, as the Brexit deal faces stiff opposition in the British parliament.

Gold's direction in the near term would be determined by moves in the greenback, which could be pressured if the Fed takes a more cautious approach to future policy tightening amid concern of an economic slowdown next year, analysts said.

"The metal could be in for a sizeable drop should support at $1,220 break, in which case a return back down to the next support at $1,205 would become likely," said Fawad Razaqzada, an analyst with Forex.com.

"With the 10-year U.S. bond yields on the rise again, this may support the greenback and simultaneously prevent gold from going higher."

Gold prices have lost about 10 percent from their April peak and are down 6 percent so far this year.

"Given that (speculative) positioning is at its lowest level since 2002, we find it difficult to see gold going any lower and expect it to rebound as soon as strong dollar trend begins to fade," Goldman Sachs analysts said in a note.

Speculators increased their net short positions in Comex gold and silver contracts in the week to Nov. 13.

"If U.S. growth slows down next year, as expected, gold would benefit from higher demand for defensive assets," Goldman said.

Among other precious metals, silver rose 0.1 percent to $14.25 an ounce and platinum was up 0.8 percent at $845.50.

Palladium climbed 2.2 percent to $1,143.49 an ounce. Prices fell about 3 percent in the previous session, their biggest one-day percentage decline since Aug. 15.