Gold Prices Slip as Global Tensions Ease, Fed Remarks Watched

Investing.com – Gold prices dropped on Thursday on hopes of a thaw in U.S.-Sino relations and on increasing hopes that a ‘hard Brexit’ scenario can be avoided.

News that Chinese Vice Premier Liu He will visit the U.S. on Jan. 30-31 for the next round of trade talks gave investors hope that a potential agreement between the world’s two largest economies was moving forward. The news was a welcome counterpoint to news of a U.S. criminal investigation into telecoms equipment supplier Huawei.

The U.S. is due to raise tariffs on a further $200 billion of Chinese imports in March unless the two countries can resolve their differences on trade. The recent impasse has supported gold, considered a safe haven in times of geopolitical tension.

At 10:12 AM ET (15:12 GMT), for February delivery on the Comex division of the New York Mercantile Exchange gained $3.65 or 0.28%, to $1,290.15 a troy ounce.

Elsewhere, U.K. Prime Minister Theresa May’s victory on Wednesday against a no confidence vote led analysts to speculate that the risk of the U.K. exiting the European Union without a deal had diminished. That was despite the fact that May’s agreement with the EU over Brexit was rejected a day earlier by the U.K. parliament in a record-breaking defeat.

May plans to hold a parliamentary vote on her Brexit “Plan B” on Jan. 29.

With that vote and the U.S.-Sino talks set for the end of the month, coinciding with the Fed’s policy-setting meeting on Jan. 29-30, analysts said that interim moves in gold would depend largely on any messages from policymakers ahead of time.

“There’s a lot of speculation that we’ve seen the end to the rate-hike cycle and many people are even talking about rate cuts this year,” said Bart Wakabayashi, Tokyo branch manager at State Street (NYSE:) Bank.

“The immediate (impact) is going to be the messaging from the Fed plus, of course, their action,” he said.

Gold prices are highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion.

In other metals trading, lost 0.81% at $15.512 a troy ounce by 10:12 AM ET (15:12 GMT).

advanced 2.15% to $1,351.65an ounce, while sister metal traded up 0.31% at $810.40.

In base metals, lost 0.28% to $2.666 a pound, while aluminum futures lost 0.54% to $1,853 per metric ton after Alcoa (NYSE:) said the demand outlook for the metai was the weakest in 10 years.

— Reuters contributed to this report.

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