A shop assistant arranges gold accessories at a gold store in Lin'an, Zhejiang province, China. Picture: REUTERS
A shop assistant arranges gold accessories at a gold store in Lin'an, Zhejiang province, China. Picture: REUTERS

Bengaluru — Gold prices rose on Thursday as the growing expectation that the US Federal Reserve will pause its rate tightening cycle in 2019 and an impasse between US President Donald Trump and Democrats on funding for a border wall weighed on the dollar.

Spot gold was up 0.2% at $1,295.85/oz as of 4.36am GMT, hovering near Friday’s peak of $1,298.42 — a level last seen in mid-June.

US gold futures gained 0.4% to $1,297.2/oz.

Minutes from the Fed’s December 18-19 policy meeting showed that several policymakers said they could be patient about future interest rate hikes and a few did not support the central bank's rate increase that month.

“Gold is getting a bit of support out of a dovish Fed and institutional instability in the US,” said Kyle Rodda, a market analyst at IG, Australia.

“We have got the markets pricing in the possibility of a Fed rate cut rather than a hike in the year ahead,” Rodda said, adding that the Fed minutes gave the dollar a bit of a “kick down” and there were chances for gold prices to break the $1,300 level with the present sentiment.

The dollar index, which tracks the greenback against major currencies, hit its lowest level in nearly three months.

Gold prices are highly sensitive to declining interest rates, which decrease the opportunity cost of holding the nonyielding bullion while pressuring the dollar.

Meanwhile, Trump walked out of talks with Democratic congressional leaders on Wednesday over funding for a border wall with Mexico and reopening the government, saying the meeting in the White House was “a total waste of time”.

Asian equities took a breather after an extended rally, as markets awaited more news on US-China trade talks that have raised the hope of a deal to avert an all-out trade war between the economic giants.

China’s commerce ministry said on Thursday that trade talks between Washington and Beijing were progressing, but gave no details on the issues at stake.

“With the government shutdown still far from resolved and Chinese trade talks just partly concluded, we are not sure that the turbulence in the equity markets is over just yet,” INTL FCStone analyst Edward Meir said in a note.

“This prompts us to maintain our view that length in gold should be maintained as we wait to see if $1,300 resistance could be taken out more convincingly.”

Holdings in the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Trust, rose 0.33% to 799.18 tons on Wednesday.

Among other precious metals, silver was flat at $15.75/oz.

Palladium fell 0.5% to $1,320.50/oz. It scaled a record high of $1,342.43 on Wednesday after a Chinese official said the government was contemplating policies to increase domestic buying of cars.

Platinum inched up 0.1% to $825.60.