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Gold edges up as markets eye Fed's decision on rates

(Reuters) - Gold inched up on Monday, after a near 1% jump in the previous session, as investors awaited a U.S. Federal Reserve rate decision later in the week, while progress in U.S.-China trade talks curbed appetite for safe haven assets.

FILE PHOTO: An employee takes granules of 99.99% pure gold at the Krastsvetmet non-ferrous metals plant, one of the world's largest producers in the precious metals industry, in the Siberian city of Krasnoyarsk, Russia November 22, 2018. REUTERS/Ilya Naymushin/File Photo

Spot gold XAU= rose 0.2% to $1,506.95 per ounce as of 0700 GMT. U.S. gold futures GCcv1 were up 0.3% at $1,509.60 per ounce.

“All eyes are on the Fed meeting now, but what investors are really looking forward to is some clarity on whether the central bank will continue to remain dovish for the rest of this year,” said John Sharma, an economist with National Australia Bank, adding that the current take on gold is “wait and see”.

The Fed is scheduled to meet on Oct. 29 and Oct. 30, with traders seeing a 90.4% chance for a 25 basis point rate cut, according to CME Group’s FedWatch tool. The U.S. central bank has already lowered interest rates twice this year.

“Gains (if the Fed cut rates this week) may be limited as trade tensions are not as tense as they were over the summer,” AxiTrader market strategist Stephen Innes said in a note.

U.S. President Donald Trump last week said the U.S. was doing very well in its trade negotiations with China and that China wants to make a deal “very badly.”

The remarks boosted investors’ appetite for riskier assets, sending Asian shares to a three-month high on Monday.

Both U.S. and China have imposed a series of tit-for-tat tariffs over the past 15 months, stirring global recessionary fears and driving gold prices more than 17% higher this year, but the recent development has put a lid on gains.

However, NAB’s Sharma said “any development on the trade war front will just have an interim effect on gold.”

“The situation is far more complicated to be solved in a hurry.”

Gold prices were also being weighed by a strong dollar, which makes the metal expensive for buyers holding other currencies.

The dollar index .DXY, which measures the greenback against a basket of other currencies, was slightly up on Monday morning after rising nearly 0.6% last week.

Meanwhile, the European Union agreed on Friday to London’s request for a Brexit deadline extension but set no new departure date, giving Britain’s divided parliament time to decide on Prime Minister Boris Johnson’s call for a snap election.

Elsewhere, silver XAG= rose 0.4% to $18.09 per ounce. Platinum XPT= was up 0.2% at $927.73 per ounce, while palladium XPD= rose 0.8% to $1,777.08 per ounce.

Reporting by Diptendu Lahiri in Bengaluru; editing by Uttaresh.V and Aditya Soni, editing by Louise Heavens