Gold holds recent gains as Fed uncertainty persists

Investing.com-- Gold prices steadied on Thursday, but paused a recent recovery rally after stronger-than-expected U.S. retail sales data brewed some uncertainty over the path of U.S. monetary policy.

The yellow metal fell slightly on Wednesday after two straight days of strong gains, as the dollar recovered from a 2-½ month low and Treasury yields stemmed recent declines.

Safe haven demand for gold was slightly aided by high-level U.S.-China talks, as Presidents Xi Jinping and Joe Biden met in San Francisco. The meeting appeared to have prompted some improvement in Sino-U.S. relations, with both parties agreeing to reopen military channels.

But a comment by Biden after the meeting- where he called Xi a “dictator,” threatened to potentially irk Beijing. 

Spot gold rose 0.2% to $1,963.26 an ounce, while gold futures expiring in December rose 0.1% to $1,965.85 an ounce by 00:16 ET (05:16 GMT). Both instruments had recovered sharply from a three-week low earlier this week. 

Strong U.S. retail sales push up Fed uncertainty

Data released overnight showed that U.S. retail spending continued to remain resilient through October. The reading somewhat offset optimism over a recent decline in U.S. inflation, given that it could still herald sticky price pressures in the coming months. Inflation still remained well above the Fed's 2% annual target.

The retail sales data spurred a rebound in the dollar and Treasury yields, which pressured gold and stalled a two-day rally in the yellow metal.

Softer-than-expected inflation readings for October, released earlier this week, had ramped up bets that the Federal Reserve was done raising interest rates. While these bets still persisted, Wednesday’s retail sales data spurred doubts over just how long U.S. rates will remain high.

The Fed signaled a data-driven approach to future rate hikes. But Fed officials also recently reiterated that rates will remain higher for longer.

Such a scenario bodes poorly for gold, given that higher rates push up the opportunity cost of investing in bullion. This trend has limited any major gains in gold this year, keeping prices well below the coveted $2,000 an ounce level. 

Copper dips on Chinese property market woes 

Among industrial metals, copper prices fell on Thursday, tracking data that presented more weakness in China’s property market.

Copper futures expiring in December fell 0.3% to $3.7012 a pound.

Data showed that Chinese house prices continued to decline in October, presenting little relief for the property sector, which makes up nearly a quarter of China’s economy.

The sector is also a key driver of copper demand. Still, copper prices retained most of their gains this week, as other indicators- particularly industrial production- showed some resilience in the world's largest copper importer.