Gold firmed on Wednesday as uncertainties over a global economic recovery and the U.S. presidential election prompted investors to exploit the previous session’s sharp pullback to buy bullion.
Spot gold rose 0.3% to $1,895.84 per ounce by 0618 GMT, after shedding as much as 1.9% on Tuesday on the dollar’s jump. U.S. gold futures gained 0.3% to $1,899.70.
“Whenever there is a price drop, there’s a section of strategic investors who think gold is still a very good hedge against global uncertainties… So they keep coming in,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus.
With the COVID-19 pandemic showing no signs of slowing and uncertainty over U.S fiscal stimulus, the broader $1,850-$1,940 range remains intact, he added.
News that key COVID-19 vaccine trials were paused, along with an impasse in U.S. stimulus talks, soured appetite for riskier assets while propping up the dollar, capping gold’s gains.
Analysts also said fading hopes for an U.S. coronavirus aid package, especially before the presidential election, after House Speaker Nancy Pelosi rejected a $1.8 trillion proposal from the White House, could limit bullion’s gains.
“In the near term, the dollar could continue to rise both because of risk aversion because stimulus seems to be stuck and also because of (company) earnings forward guidance,” said DailyFx currency strategist Ilya Spivak
But gold’s appeal as a hedge against likely inflation and currency debasement from unprecedented money printing globally due to the pandemic has seen bullion prices rise about 25% so far this year.
“The broader case for gold” is still supportive, with the global economic slowdown likely to last much longer prompting lower interest rates, said Metals Focus’ Barot.
Silver fell 0.1% to $24.14 per ounce, while platinum rose 1.1% to $874.06 and palladium gained 1.6% to $2,351.95.
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