The Sino-U.S. trade dispute and the longest U.S. government shutdown ever is giving the dollar a bid, accelerating a much-speculated correction in palladium and forcing gold to consolidate too.
The dollar index, a contrarian trade to precious metals, rose by 0.6% to 96.333 by 2:20 PM ET (19:20 GMT) after U.S. Commerce Secretary Wilbur Ross said the United States and China were a long way from resolving their trade dispute, although he cited a fair chance for a deal.
Meanwhile, government data showed the number of federal employees filing for unemployment more than doubled in the second week of January as workers missed their first paychecks.
On the New York Mercantile Exchange's Comex division, the most-active gold futures contract settled down $4.30, or 0.3%, at $1,285.90 per ounce.
The most-activepalladium futures contract on Comex settled down $27.50, or 2.1%, at $1,280.70 per ounce.
Spot palladium traded at $1,321.70 per ounce, down $30, or 2.2%. The session low was $1,316.25.
The spot price of palladium hit all-time highs of $1,440.35 a week ago, making it the world's most valuable traded metal, although gold had reached record highs way above that in the past, scaling $1,900 an ounce. Palladium's recent rally had, however, prompted analysts to call for a correction.
The trading division of Japan's Mitsubishi are among those calling for lower palladium prices in the near-term, forecasting an average of $1,150 this year and a trading range of $1,050-$1,350.
"There is no shortage of the sponge form of the metal at present, and with Chinese, U.S. and European car sales all slowing down, we question whether palladium demand in auto catalysts may have peaked.” Mitsubishi said.
While a section of the market continues to think the auto-catalyst metal is in a supply deficit, such a perception is “unlikely to continue to justify record-high prices and the extreme tightness seen in the forward market", added Mitsubishi.
Societe Generale (PA:SOGN), meanwhile, said it had a “moderately bullish outlook” on gold, forecasting $1,300 an ounce in six months and $1,375 in 12 months.
In other precious metals on Comex, silver futures slid by 8.3 cents, or 0.5%, to $15.30 per ounce.
Platinum futures rose by $7.10, or 0.9%, to $803.50 per ounce.
In base metals,copper fell 1.0 cent, or 0.4%, to $2.64 per lb.