Gold futures booked a second straight finish in positive territory as the U.S. dollar and government bond yields both retreated, providing support for bullion.
"Gold trades higher for a second day as trade tensions between the U.S. and China escalate and the recent dollar rally looks tired," said Ole Hansen, head of commodity strategy with Saxo Bank.
December gold GCZ8, -0.01% added $2.70, or 0.2%, to end at $1,221 an ounce, marking its second consecutive gain and its first back-to-back rise since a pair of gains ended July 25, according to FactSet data. Still, the commodity has mostly traded within a narrow band and is hovering around the lows of the year.
September silver SIU8, -0.21% advanced by 5.9 cents, or 0.4%, to settle at $15.432 an ounce.
A popular metals exchange-traded fund, the SPDR Gold Trust GLD, -0.15% rose 0.2%. Analysts continue to watch flows in and out of the fund. Holdings at 25,319,951.65 ounces as of Tuesday marked the lowest since August 2017, according to Reuters data. The comparable silver ETF, the iShares Silver Trust SLV, +0.14% added 0.4%.
U.S. dollar trading was muted, with the ICE U.S. Dollar Index DXY, -0.03% off 0.1% at 95.16 late in the day. Meanwhile, the benchmark 10-year Treasury note yield TMUBMUSD10Y, -0.03% was at 2.96%, versus 2.97% late Tuesday in New York.
A stronger dollar can make purchasing dollar-pegged metals less attractive to buyers using other currencies, and richer yields for government paper, viewed as a risk-free instrument, can raise the opportunity costs of owning haven bullion, which doesn't offer a yield and costs to store and insure.
Those factors had thus far conspired to frame gold's recent weakening trend before a modest respite.
"A strong dollar, not least against the Chinese yuan, and a continued focus on rising U.S. rates, robust U.S. stocks, and a lack of inflationary pressures have all conspired to reduce gold's appeal as a safe haven and diversification product," said Hansen. "A change in the short-term outlook to the dollar therefore carries a risk to bears holding such an elevated position."
The latest trade salvo, meanwhile, came at the hands of the U.S. The Trump administration announced another round of 25% tariffs on $16 billion of Chinese imports starting in two weeks, and Beijing is expected to retaliate. That brings the running total to about $50 billion in goods that now face a 25% tariff on Chinese imports in an escalating trade spat.
Trade tensions, although doing little to buoy gold's routine role as a haven asset, play out against an interest-rate backdrop that is negative in the short term for the gold market. The Federal Reserve is expected to increase interest rates twice more this year and three times next year. The next policy meeting is in September.
In other metals trading, September copper HGU8, +0.16% fell less than 0.1% to $2.7510 a pound. October platinum PLV8, +0.02% shed $1.90, or 0.2% to end at $829.50 an ounce, while September palladium PAU8, -0.27% gave up $16.50, or 1.8%, to settle at $886.40 an ounce.
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