Gold off one-week low on economic recovery fears

Bengaluru — Gold prices edged up on Wednesday, after hitting a one-week low in early trade, lifted by renewed fears regarding economic recovery and uncertainty around the US presidential election after President Donald Trump’s Covid-19 diagnosis.

Earlier in the day, spot gold hit its lowest since September 28 at $1,872.66/oz. Bullion prices climbed 0.3% to $1,882.12 by 3.45am GMT. US gold futures were down 1.2% at $1,886.30.

The low interest-rate environment globally along with uncertainties stoked by the upcoming US election bodes well for gold, said Brian Lan, MD at dealer GoldSilver Central in Singapore. However, “if the US dollar strengthens more we will see it cap gold prices.”

The US president, who is being treated for Covid-19, called off negotiations on Tuesday over the aid package that was meant to stimulate the economy, until after the November 3 election.

The announcement stoked risk aversion, while bolstering the dollar and dragging gold prices lower up to 2%. Gold tends to benefit from widespread stimulus measures as it is widely viewed as a hedge against inflation and currency debasement.

The dollar index was last up 0.2% against rivals. Trump’s decision to call off stimulus talks increases downside risks for an already shaky US economy, which is likely to favour safe-harbour flows into the dollar, in which the bullion is priced.

Meanwhile, top US and European central bankers on Tuesday called for renewed government spending to support families and businesses hit by the pandemic.

Investors would now watch out for minutes from US Federal Reserve’s September 15-16 policy meeting and vice-presidential debate due later in the day.

On the technical front, spot gold may revisit its September 24 low of $1,847.57/oz, according to Reuters technical analyst Wang Tao.

Silver rose 1.5% to $23.43/oz, platinum was up 1.3% at $859.05/oz, while palladium climbed 0.4% to $2,351.30/oz.