By Barani Krishnan
Investing.com - The one-step-forward-two-steps-back trade in gold continues as forecasts for a broadly dovish Federal Reserve were offset by uncertainties on when U.S. rate hikes would finally kick in.
The possibility of the U.S and China agreeing to a trade deal soon is also capping a breakout in the yellow metal, which, like the dollar, has become a hedge to the standoff between the world's biggest economies.
Still, gold joined precious metals that rose across the board for the week, rare for the entire asset class. Palladium was also a major winner after record highs above $1,500 an ounce were notched by the auto-catalyst metal.
The U.S. gold futures benchmark April contract on the Comex division of the New York Mercantile Exchange settled up $5, or 0.4%, at $1,332.80 per ounce. For the week, the contract was up 0.8%, rising for a second week in a row, after positive finishes in four of the past five sessions.
Spot gold, reflective of trades in physical bullion, gained by $5.32, or 0.4%, to $1,328.99 per ounce by 2:46 PM ET (19:46 GMT).
Palladium remained the world's most valuable traded metal as its spot price rose $21.80, or 1.5%, to 1,495.50 per ounce. On Wednesday, spot palladium reached a record high of $1,506.65.
Gold's advance this week was dealt a sharp setback on Thursday when April futures fell 1.5%, its most in six months, on reports that the United States and China were making significant progress in ending their seven-month trade war. Top U.S. and Chinese trade negotiators continued their negotiations in Washington on Friday, with President Donald Trump meeting Chinese Vice Premier Liu He.
Gold also lost some of its bullish mojo this week after Wednesday’s minutes from the January Fed meeting revealed that the group was not sure whether they would raise interest rates again this year. Almost every Fed participant said it would be desirable to announce sooner than later a plan to stop reducing the central bank's asset holdings before the end of the year, the minutes indicated.
Despite the somewhat cloudy outlook for gold, some analysts think the yellow metal's standing was solid at current levels.
"I would be very surprised to see the price of spot gold penetrate the next level of support at the $1,318 level. On the technical side, I think this level should be well supported," said Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas.
"It looks like the last move to the downside got many nervous longs to liquidate their gold holdings," Pehowich said. "But one must remember just a few months ago we were trading at the $1,160 level, so if the price stays above $1,300, many investors still see gold to continue having upside potential."
Trades in other Comex metals as of 2:46 PM ET (19:46 GMT):
Palladium futures up $15.85, or 1.1%, at $1,460.95 per ounce.
Silver futures up 9.4 cents, or 0.6%, at $15.90 per ounce.
Platinum futures up $18.55, or 2.2%, at $844.85 per ounce.
Copper futures up 4.5 cents, or 1.6%, at $2.95 per pound.