Gold jumped to a two-week high on Friday after weak U.S. economic data boosted expectations the U.S. Federal Reserve would hold pat on monetary tightening, while palladium matched an all-time high on a prolonged deficit.

An employee of the ProAurum gold house decorates, what they say is Europe’s most expensive Christmas tree, made of 2.018 Vienna philharmonic gold coins, valued at 2.3 million euros in Munich, Germany December 3, 2018. REUTERS/Michael Dalder/Files

Spot gold was up 0.7 percent at $1,321.31 an ounce at 2:21 p.m. EST (1921 GMT), having touched its highest level since Feb. 1 at $1,321.88.

U.S. gold futures settled up 0.6 percent at $1,322.10.

While gold is on track for a small weekly gain, it was rangebound for most of the week, with gains on Friday stemmed by a rebound in stocks.

“Gold (price action) is like watching oil evaporate. The market is continually bearish at lows and bullish at highs with actual breaks infrequent,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“The end of the (Fed) tightening cycle now looms which improves the overall backdrop for gold significantly. With the Fed on hold, there is less pressure for the rest of the globe to keep pace.”

The metal gained 0.5 percent in the previous session after weak U.S. retail sales data added to disquiet about slowing growth, which could prompt the Fed to hold interest rates steady for a while.

Lower interest rates reduce the opportunity cost of holding non-interest bearing gold and weigh on the dollar.

The disappointing U.S. data followed a spate of weak economic reports from China and Europe.

This helped gold hold its ground amid a rebound in global stocks on hopes of a thaw in the U.S.-China trade dispute.

“The world economy is slowing very rapidly and therefore monetary policy everywhere will be eased, so the outlook is a lot more inflationary, helping gold,” said Alasdair Macleod, head of research at GoldMoney.com.

The world’s two biggest economies reached a consensus in principle on key issues during ongoing talks, China’s state news agency Xinhua said. Negotiations will continue next week in Washington.

Meanwhile, palladium, was up 1.2 percent at $1,432 per ounce. Earlier prices surged to match an all-time high of $1,434.50, last touched on Jan. 17, and were on track to mark second week of gains.

“Bullish commentary, including from Johnson Matthey, on widening deficits for 2019 this week saw palladium close clearly above $1,400 yesterday, which has driven more buying today,” BMO’s Wong said.

“The size of the deficit was bigger than expected.”

Leading autocatalyst manufacturer Johnson Matthey said a market deficit will widen dramatically this year.

Platinum climbed 2.5 percent to $805.00 per ounce, recording its biggest one-day percentage gain since Jan. 4. Silver was up 1 percent at $15.77.

Reporting by Arpan Varghese and Sumita Layek in Bengaluru; Editing by Chizu Nomiyama and Matthew Lewis


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