Gold steadies as dollar rally fades; palladium hits 13-yr high
London (July 8) Gold steadied on Tuesday as the dollar's recent rally started to fade and investors awaited clearer signs from the U.S. Federal Reserve that it is firmly on track to raise interest rates next year, while palladium touched a new 13-year high.
A strong U.S. non-farm payrolls report last week pressured gold prices as it lifted speculation that the Federal Reserve could increase rates as soon as the fist quarter of 2015.
Higher rates would encourage investors to switch to assets that pay interest, which tend to be more attractive than gold.
Spot gold fell 0.1 percent to $1,318.85 an ounce by 1006 GMT, while U.S. gold futures for August delivery edged up 0.2 percent at $1,319.90 an ounce.
"There is no great deal in the economic calendar apart from the FOMC (Federal Open Market Committee) meeting tomorrow ... we will wait and see whether there is any broad confirmation of a slightly more stringent tone in regards to monetary policy tightening," Mitsubishi Corp analyst Jonathan Butler said.
"We are all well aware that that is clearly the long-term trend and the U.S. jobs data we had last week supports that."
The market is now eyeing the release of minutes from the Fed's June policy meeting on Wednesday to gauge the central bank's view on interest rates and economic strength.
Meanwhile, Fed policymakers Jeffrey Lacker and Narayana Kocherlakota are both due to speak later on Tuesday.
The dollar was up just 0.1 percent against a basket of currencies, having touched its highest in almost two weeks in the previous session.
Some traders said a lack of support from physical markets could also weigh on prices.
Physical demand in top gold consumer Asia has been weak as the metal is holding above $1,300. Many are waiting for a drop in prices before making any purchases.
Meanwhile, gold is still seeing some safe-haven demand from geopolitical tensions in the Middle East and Ukraine.
SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 1.8 tonnes to 798.19 tonnes on Monday.
PALLADIUM HITS 13-YEAR HIGHS
Palladium hit a fresh 13-year peak of $871.80 an ounce. The metal, used in catalytic converters, was aided by last week's data showing U.S. auto sales at an eight-year high in June.
Platinum was unchanged at $1,491.25 an ounce on persistent concerns over a fragile supply situation in South Africa, where a wide five-month stoppage at the three main platinum mining companies ended last month with pay increases of about 20 percent.
Since then, other smaller strikes have broken out, stoking supply fears.
The world's second biggest platinum producer Impala Platinum said 2,000 workers at its Marula mine who had been on a wildcat strike for better wages since Friday returned to work on Tuesday.
"With limited South African primary supply in 3Q14 and producer inventories now exhausted, we continue to forecast an improvement in the price (at) $1,538 an ounce in the second half versus $1,438 in the first half," Morgan Stanley said in a note.
Spot silver was flat on the day at $21.03 an ounce.
Source: Reuters
