As the U.S. and China work toward a trade deal, gold bugs are turning their attention back toward the Federal Reserve's promise to be patient with rate hikes.
The spot price and futures of bullion rose on Tuesday for only the second time in eight sessions after Fed Chairman Jerome Powell said in a speech in Mississippi that many rural areas have not benefited from U.S. national prosperity.
While Powell said he didn't foresee an economic downturn, with unemployment near a half-century low and economic output at a "solid pace", he said rural areas needed special support, such as access to affordable credit to start small businesses and high-quality education to train workers. It was yet another sign that the Fed was in no hurry to tighten rates.
The spot gold contract, reflective of trades in physical bullion, rose $2.80, or 0.2%, at $1,310.97 per ounce by 1:46 PM ET (20:46 GMT).
In futures trading, gold's benchmark April contract on the Comex division of the New York Mercantile Exchange settled up $2.10, or 0.2%, at $1,314 per ounce.
Gold's gains were capped by a surge in equity markets as U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer arrived in Beijing for talks aimed at reaching a bilateral deal before a March 1 deadline that could bring additional tariffs on $200 billion of Chinese goods.
Stocks on Wall Street, a contrarian trade to gold, also rose on a tentative deal reached by American lawmakers to avoid another partial government shutdown. It was unclear, however, if President Donald Trump would accept that deal as Congressional aides said it did not contain the $5.7 billion he wants for a border wall.
Gold benefits from slower or no rate hikes as it doesn't bear interest, unlike the dollar. The dollar index, which tracks the greenback against a basket of other major currencies, slid 0.4%.
Market expectations for a Fed rate hike this year are hanging by a thread, according to 's Fed Rate Monitor Tool, after Powell pledged since the start of this year to be patient.
Powell aside, Cleveland Fed President Loretta Mester and Kansas City Fed Chief Esther George are due to speak later Tuesday.
ING Head of Commodities Strategy Warren Patterson, in his daily note, highlighted two bullish factors currently for gold.
First, Patterson noted a 64% increase in Indian gold imports during January and suggested that 2019 could be a better year for the precious metal thanks to “higher government spending ahead of general elections and monetary easing by the Reserve Bank of India”.
With regard to China, he noted that the central bank increased its gold holdings for a second-consecutive month.
Gold futures hit highs above $1,300 for five-consecutive sessions through Jan. 31, peaking at $1,331.10, before profit-taking set it back.
Palladium remained the world's most valuable traded metal, with its spot price trading up $8.15, or 0.6%, at 1,397.05 after reaching $1,404.05 earlier.
Spot palladium first traded above gold last month when it hit record highs of $1,440.35 on Jan. 17. Gold's own peaks have been higher in the past, rallying above $1,900 in 2011.
Trades in other Comex metals as of 1:46 PM ET (18:46 GMT):
Palladium futures up $16.55, or 1.2%, at $1,373.35 per ounce.
Silver futures up 0.3 cent, or 0.02%, at $15.70 per ounce.
Platinum futures up $4.20, or 0.6%, at $790.80 per ounce.
Copper futures down 1.8 cents, or 0.6%, at $2.77 per pound.