Gold climbs slightly higher on new virus strain fears

Bengaluru — Gold prices gained on Tuesday as approval by US Congress of a $900bn coronavirus aid package boosted the metal’s appeal as an inflation hedge, while a new coronavirus strain in the UK   lent further support.

Spot gold rose 0.4% to $1,882.94/oz early on Tuesday, after slipping as much as 1.3% in the previous session as the new coronavirus strain rattled markets and investors opted for the dollar. US gold futures rose 0.3% to $1,888.90/oz.

“Heightened inflation expectations due to the US fiscal stimulus package have seen gold pick up as an inflation hedge,” said Howie Lee, an economist at OCBC Bank.

The US Congress approved a nearly $900bn coronavirus aid and federal spending bill that  averted a government shutdown.

The dollar held firm and Asian shares inched lower as the new coronavirus strain in the UK prompted a lockdown affecting more than 16-million Britons and caused several countries around the world to shut their borders to Britain and SA.

Uncertainties relating to the global economic outlook such as the current Covid-19 strain are likely to support gold going forward, Lee said, adding the metal could climb above $2,000 by the second quarter of 2021.

On the technical front, gold may drop to $1,862/oz again, as a bounce from $1,764.46 may have completed, according to analyst Wang Tao. Silver rose 1.1% to $26.45/oz. Platinum fell 0.4% to $1,005.10 and palladium gained 0.4% to $2,318.13.