Gold bars. Picture: REUTERS
Gold bars. Picture: REUTERS

Bengaluru — Gold held steady on Wednesday, supported by uncertainty around Brexit, after MPs voted down British Prime Minister Theresa May’s deal to leave the EU, and the hope for a rate hike pause by the US Federal Reserve.

Spot gold was steady at $1,289.31/oz at 2.51am GMT.

US gold futures were also firm at $1,288.80/oz.

“The safe-haven appeal is quite strong as there are rising possibilities of a disorderly Brexit,” said Benjamin Lu, analyst with Phillip Futures, adding that the metal was holding pretty well despite competing influence from US equity markets

British legislators defeated May’s Brexit divorce deal by a crushing margin, triggering political chaos that could lead to a disorderly exit from the EU or even to a reversal of the 2016 decision to leave.

“We are seeing weakness in economy in China as well as the US and markets are expecting that Fed might slow interest rates in the near future,” Lu said.

Image: Iress

In separate appearances on Tuesday, Fed policymakers from across the spectrum of views agreed the central bank should pause further rate hikes until it is clear how much the US economy will be held back by larger risks like slowing growth in China and narrower ones like the ongoing budget stalemate in Washington.

Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding nonyielding bullion. Lower interest rates also tend to weigh on US yields and the dollar, in which gold is priced.

The US economy is taking a larger-than-expected hit from a partial government shutdown, White House estimates showed on Tuesday, with the longest such shutdown in US history dragged into its 26th day.

“The scaling back of [Fed rate hike] expectations removes a key drag on prices that hindered much of the upside momentum in 2018," Standard Chartered said in a research note.

“The macro backdrop is shaping up to be more supportive for gold. However, we would caution restraint for now, as inflationary risks have been contained, US dollar weakness stalled in recent sessions and equity markets have stabilised.”

Spot gold has gained more than 11% since hitting a one-and-a-half-year low in mid-August at $1,159.96, mostly due to tumultuous stock markets and a weakness in the dollar.

Among other precious metals, palladium rose 0.2% to $1,321/oz. It hit a record high at $1,342.43/oz last week.

Platinum was steady at $793.50.

Silver slipped 0.2% to $15.55/oz.