Gold bounced up slightly on Tuesday, as a weaker US dollar gave bullion a boost after the previous day's sharp decline and as investors awaited the minutes, due on Wednesday, of the Federal Reserve meeting held in November. Gold benefited from some safe-haven buying from investors leery of a political crisis in Germany, Europe's largest economy.
Spot gold was up 0.3 percent at $1,280.63 an ounce by 1:44 pm EST (1844 GMT). The metal fell about 1.4 percent on Monday, its biggest daily percentage drop since September 11. US gold futures for December delivery settled up $6.40, or 0.5 percent, at $1,281.70 per ounce. Silver climbed 0.2 percent to $16.94 an ounce. On Monday, silver fell 2.3 percent, its biggest one-day percentage fall since September 26.
"Given the fact that gold and silver prices fell so dramatically yesterday, we have seen a little bargain hunting coming into the market today," said David Meger, director of metals trading at HHigh Ridge Futures in Chicago The Fed minutes on Wednesday should provide signals on US monetary policy. "The Fed rate hike in December is roughly priced in and unless there are very hawkish minutes, it's more that people are looking for direction about future moves," said Georgette Boelle, a commodity strategist at ABN AMRO.
"It seems likely that we will have more rate hikes next year which is negative for gold but the Fed will want to see evidence that inflation is picking up to really be confident in the interest rate hike path," said Danske Bank analyst Jens Pedersen.
BMI Research in a note lowered its gold price forecast slightly to $1,300 per ounce in 2018 and $1,325 in 2019, citing "our view that the US Fed will hike rates by more than is reflected in the market," adding inflation and political risks in 2018 would support gold prices. Platinum was up 1.2 percent at $934.50. Palladium gained 1.1 percent at $999.75 an ounce.
Platinum lost nearly 3 percent Monday, its biggest decline since early May. On Tuesday, an industry report said the global platinum market deficit will rise sharply next year.
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