Gold prices up on Tuesday as the dollar rose but receding worries about the outcome of the US election and expectations of US rate rises in December could mean lower levels. Spot gold was up 0.1 percent at $1,257.74 an ounce at 1344 GMT. US gold futures rose 0.2 percent to $1,258.7. The US currency retreated from a seven-month high against a basket of currencies, making dollar-denominated gold cheaper for holders of other currencies.
But dollar losses may not last if expectations the US Fed will hike rates in December are reinforced by economic data over coming months. According to CME Group's FedWatch programme, the chances of the US Fed hiking rates in December are about 70 percent. "People are waiting for December to see what happened with the Fed, over the next month or so there could be a little more downside," Warren Patterson, commodity strategist at ING, said.
"There's also more optimism that Hilary Clinton will probably win the election." The US Presidential election takes place on November 8. The RealClearPolitics average of national opinion polls shows Clinton currently leading Donald Trump by 7.1 percentage points, at 46 percent to 38.9 percent. Traders said the US election polls were partly behind funds cutting speculative positions, but that was offset to an extent by investors' rising interest in physically backed gold exchange traded funds.
US inflation data for September data did not change expectations of a December rate rise, traders said. Overall gold holdings in ETFs at 57.433 million ounces are up more than 2 percent since September 15. On the technical front, gold's upside could be capped by the 200-day moving average at $1,265, while downside support kicks in at $1,241.20, the low from October 7.
However, a Reuters survey of delegates at a conference in Singapore showed gold prices rising to almost $1,350 by October next year as higher physical demand offsets losses due to a Fed rate rise. Silver was up more than 0.5 percent at $17.52 an ounce and palladium was up 0.9 percent at $642.50. Platinum rose 0.6 percent to $943 an ounce. It touched a seven-month low of $923 on Monday. Platinum and palladium are under pressure from the weaker South African rand against the dollar.
South Africa is the world's largest producer of platinum and the second-largest producer of palladium. When the rand falls production costs calculated in dollar come down too. "The floor is lower, they don't need the same amount of dollars to make the same margin," said Carsten Menke, an analyst at Julius Baer. "The other way to look at it is that the rand-based platinum price has risen."