Gold prices edged higher early on Tuesday as softer-than-expected US consumer spending data pressured the dollar, ahead of a closely-watched Federal Reserve policy statement. Data showed demand for US-made non-defence durable goods, excluding aircraft, fell 1.7 percent in September, its biggest drop in eight months and a cautionary note for an economy that otherwise seems to be moving forward at a steady clip.
Investors are focusing on the Fed's latest policy statement on Wednesday afternoon, when the US central bank will likely reinforce its stated willingness to wait for a long while before hiking interest rates, after a volatile month in financial markets. "The rally after today's durable goods number is somewhat reassuring the Fed meeting this week will not have any unusual language in reversing its continued low interest rates policy," said George Gero, vice president of RBC Capital Markets in New York. A delay in any rate rise could boost gold, a non-interest-bearing asset. Spot gold was up 0.3 percent at $1,228.47 an ounce by 2:49 pm EDT (1849 GMT), having earlier hit a two-week low of 1,222.20 an ounce.
US COMEX gold futures for December delivery settled up 10 cents an ounce at $1,229.40, with volume in line with their 30-day average, preliminary Reuters data shows. Gold's gains are limited as the S&P 500 equities index rose and as US data also showed consumer confidence surged to a seven-year high in October. Gold prices are also underpinned by decent physical demand. The US Mint has sold nearly 60,000 ounces of American Eagle gold coins so far in October, its highest monthly sales since January, boosted by heightened geopolitical uncertainty and better interest from Asian and European retail investors.
Silver climbed 0.7 percent to $17.20 an ounce. Investor interest in silver remains soft, however. Outflows from silver-backed exchange-traded funds were 11.51 million ounces in October, the largest monthly decline since May last year, UBS said in a note. Platinum was up 1 percent at $1,260.40 an ounce and palladium climbed 1.8 percent to $790.70, having earlier hit a near-three-week high at $798 an ounce. A potential "death cross" on palladium's daily chart suggests the autocatalyst metal's price is vulnerable to resuming a slide, analysts said.