Gold gathers steam amid fresh US stimulus hopes

Bengaluru — Gold prices firmed on Tuesday after falling as much as 5.2% in the previous session, as hopes of more US stimulus measures to cushion the Covid-19 pandemic hit bolstered the precious metal’s appeal as an inflation hedge.

Spot gold climbed 1% to $1,880.41/oz by 3.52am GMT. It fell to $1,849.93, its lowest level since September 28, on Monday after US drugmaker Pfizer said its experimental Covid-19 vaccine was more than 90% effective, based on initial trial results.

US gold futures were up 1.3% at $1,878.90. Central banks are unlikely to change their accommodative stance in the near to medium term as it will take time for a vaccine deployment and the subsequent pick-up in growth, inflation and labour market, said Lachlan Shaw, head of commodity research at National Australia Bank.

“If inflation expectations pick up as a result of increased economic activity from the vaccine, that should keep a lid on long US real yields and be a supporting driver for gold.”

While optimism over coronavirus vaccine development boosted risk appetite, uncertainties continued to loom over the effect of surging Covid-19 cases in the US and Europe.

“I still think we’ve got more stimulus coming and the Fed will keep rates low, while a vaccine is going to provide that reflationary impulse … That’s why the markets are still holding on to gold,” said Stephen Innes, chief global market strategist at financial services firm Axi.

Dallas Federal Reserve Bank president Robert Kaplan said on Monday the resurgence of Covid-19 poses downside risks to the US economy, while Cleveland Fed president Loretta Mester said the central bank’s emergency lending programmes are still needed.

Silver rose 0.5% to $24.19/oz. Platinum gained 0.4% to $869.61 and palladium was 0.6% higher at $2,492.32.

Reuters