Gold futures ended higher Wednesday, as a pullback in the dollar on the back of a potential new round of trade talks between the U.S. and China lifted prices for the metal to the highest finish in two weeks.
December gold US:GCZ8 added $8.70, or 0.7%, to settle at $1,210.90 an ounce—the highest since settlement Aug. 29, according to FactSet data.
In electronic trading shortly after the release of the Federal Reserve’s Beige Book, prices for the contract traded even higher at $1,213.30. The snapshot of U.S. activity revealed weaker growth in August as the overall domestic economy expanded at a “moderate pace.”
Early Wednesday, data showed that the U.S. producer-price index declined by 0.1% last month, contrary to the 0.2% increase expected by economists polled by MarketWatch.
The drop in wholesale prices was the first since February 2017, but the booming U.S. economy has produced enough inflation to push the Fed into a somewhat more aggressive posture.
U.S. interest-rate hikes are “due to commence this September which is additionally pushing investors towards the greenback,” said Naeem Aslam, chief market analyst with Think Markets, in emailed comments early Wednesday.
“Investors are also aware that another rate hike is believed to be scheduled for December,” he said. “The strength of this rate hikes being carried out depends upon the economic data.”
The policy-setting Federal Open Market Committee is set to conclude a two-day meeting on Sept. 26, with expectations that the FOMC will lift rates by a quarter of a percentage point.
Gold has also been buffeted by concerns that clashes between the U.S. and China could lead to slack in demand for the metal. Thus far tit-for-tat tariff disputes between Washington and Beijing have supported overall gains in the U.S. dollar, pressuring commodities that are typically priced in the currency.
But The Wall Street Journal on Wednesday reported that the U.S. is reaching out to China for a new round of trade discussions, ahead of the Trump administration’s plans to place more tariffs on Chinese imports.
“Metals trading has been all about the trade relationship between the U.S. and China recently, as the dollar continues to move inversely with sentiment towards a trade war,” said Tyler Richey, co-editor of the Sevens Report, adding that the “dollar has been the main safe haven for trade fears.”
The chatter surrounding possible trade talks is “pressuring the dollar and in turn supporting a rise in gold and more pronounced rally in copper futures.”
The ICE U.S. Dollar Index US:DXY eased by 0.5%, but has climbed about 2.9% year to date.
Other metals that tend to be sensitive to trade spats, copper and silver, outpaced gold’s percentage gains. December silver US:SIZ8 added 1% to $14.293 an ounce, while December US:HGZ8 rose 2.1% to reach $2.676 a pound.
Prices for silver settled Tuesday at $14.052, the lowest since January 2016. “The silver investor has been unmotivated until the recent larger price drop, which is stimulating the current upswing,” said Peter Spina, president and chief executive officer of GoldSeek.com. “If the silver price continues to struggle in the lower teens, I would expect the recent upswing in demand to level off again.”
Elsewhere on Comex, October platinum US:PLV8 added 1.3% to $799.90 an ounce, while December palladium US:PAZ8 rose 0.3% to $965 an ounce.
Among the exchange-traded funds, the SPDR Gold Shares US:GLD and the iShares Silver Trust US:SLV each traded up 0.9%. The VanEck Vectors Gold Miners ETF US:GDX added 3.7%.