(Reuters) – Gold prices inched up on Thursday on expectations that the U.S. Federal Reserve will hold rates steady this year, while investors hoped for developments in trade talks between Washington and Beijing.

FUNDAMENTALS

Spot gold was up 0.2 percent at $1,308.20 per ounce, as of 0105 GMT.

U.S. gold futures were down 0.3 percent at $1,311.

U.S. consumer prices were unchanged for a third straight month in January, leading to the smallest annual increase in inflation in more than 1-1/2 years, which could allow the Federal Reserve to hold interest rates steady for a while.

Several Federal Reserve officials have indicated that they will support a pause in interest rate hikes from the U.S. central bank to assess its impact in economy.

Risk sentiment has remained high over the last 48 hours in the financial markets on rising expectations of a breakthrough in the trade impasse between United States and China which has led to a modest rally in global equities.

U.S. Treasury Secretary Steven Mnuchin said talks with China went well on Wednesday, as the world’s two largest economies try to hammer out an agreement.

Spain’s parliament rejected a draft 2019 budget on Wednesday after Catalan separatists turned their back on the government, pushing the country close to an early national election amid an increasingly fragmented political landscape.

BNP Paribas on Wednesday said it expects gold prices to average $1,330 per ounces in 2019 and $1,415 per ounces in 2020.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 0.26 percent to 796.85 tonnes on Wednesday from 798.89 tonnes on Tuesday.

Barrick Gold Corp on Wednesday forecast a double-digit jump in gold output this year, underscoring the growth potential of the world’s largest publicly traded bullion producer after it bought rival Randgold Resources last month.

Russia’s Finance Ministry said on Wednesday that Russia had produced 314.42 tonnes of gold and 1,119.95 tonnes of silver in 2018.

The Italian government has no intention of selling the Bank of Italy’s gold reserves to plug budget holes, a prominent lawmaker of the ruling League party said on Wednesday.

A deficit in the palladium market that has driven prices of the autocatalyst metal to record highs will widen dramatically this year, specialist materials company Johnson Matthey said in a report on Wednesday.