Gold steadies as further lockdown worries rise
Gold prices steadied in a tight range on Tuesday, as worries over rising Covid-19 cases across Europe countered pressure from a stronger US dollar ahead of speeches by Federal Reserve policymakers this week.
Spot gold was up 0.1% at $1,914.28 an ounce by 4.31am GMT, after dropping more than 3% to $1,882.70, its lowest level since August 12 on Monday.
US gold futures gained 0.5% to $1,919.70 on Tuesday. Earlier in the day, a firmer US dollar dented gold’s appeal, with the dollar index holding on to overnight gains against its rivals. A firmer dollar makes bullion more expensive for holders of other currencies.
Gold is now more sensitive to the US dollar rather than any other factors
“Gold is now more sensitive to the US dollar rather than any other factors,” said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index.
But offering support to gold were concerns about fresh lockdowns in Europe, which has reported a surge in virus cases. Doubts about a swift economic recovery also kept investors away from riskier assets.
“In the near-term, gold may struggle to hold gains above $1,900. In the event that it breaks down $1,900 it may open more room to the downside towards maybe $1,870,” Yang said.
Investors are eyeing speeches by Fed committee members, including chair Jerome Powell, who will appear before congressional committees this week.
“Central banks would continue to have concerns about economic growth,” Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note. “Ultra-low yields and negative real interest rates will remain as they are now for much longer, this should provide support for the gold prices in the longer term.”
Lower interest rates decrease the opportunity cost of holding non-yielding bullion. Gold, which has risen nearly 26% this year, is also widely viewed as a hedge against inflation and currency debasement.
Elsewhere, silver was flat at $24.73 an ounce, platinum was up 1.2% at $891.75 and palladium rose 0.9% to $2,293.71.
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