Gold rose overnight on concerns that a US House vote on Hong Kong could hamper trade negotiations between the country and China and as investors awaited a key Brexit summit but bullion’s gains were overshadowed by deficit-hit palladium as it again set a record.
Spot gold rose 0.5 per cent to $US1,488.84 per ounce.
US gold futures settled up 0.7 per cent to $US1,494.
In a move that soured ties between the United States and China on Tuesday, the US House of Representatives passed four pieces of legislation taking a hard line on authorities in Beijing, three related to pro-democracy protests in Hong Kong, drawing opposition from the Chinese government.
“A lot of people think this (US legislation on Hong Kong) is going to hinder the negotiations with the tariffs (between US and China), so again, when the tariffs are questionable, people run to gold,” said Michael Matousek, head trader at US Global Investors.
Analysts are also wary of the outcome of the Brexit summit in Brussels on Thursday and Friday that will determine whether Britain is headed for a deal to leave the European Union on the due date, a no-deal exit or a delay.
Also helping gold, US equity markets moved lower as traders’ worries about the legislation targeting Hong Kong offset positive earnings.
Investors also await the US Federal Reserve meeting at the end of the month for clarity on further interest rate cuts.
Indicative of sentiment, holdings of the world’s largest gold-backed ETF, SPDR Gold Shares, fell on Tuesday to 919.66 tonnes, but held close to their highest level in nearly three years.
Elsewhere, palladium rose 1.9 per cent to $US1,766.16 an ounce after hitting a record high of $US1,779.23 earlier.
“The story with palladium is one of a continued supply/demand imbalance. We’ve had a global supply shortfall of palladium since 2012 and it doesn’t appear to be ending anytime soon,” said Gregory Leo, chief investment officer and head of Global Wealth Management at New York-based IDB Bank.
The metal, used in vehicle exhaust systems to reduce harmful emissions, has climbed about 40 per cent so far this year on a sustained supply crunch.
However, US Global Investors’ Matousek said palladium’s recent jump has been more technical than anything else.
“Same as gold, if anything is rallying the way it is, the trend looks great and people want to own it, bringing more momentum players into the trade. The driver behind is about 75 per cent technical and 25 per cent fundamental,” Matousek said.
Silver was steady at $US17.38 per ounce while platinum fell 0.3 per cent to $US886.12.