Gold regains traction amid Fed fears over Covid-19 recovery

Bengaluru — Gold on Thursday bounced back from the previous session’s hefty losses after the US Federal Reserve raised concerns that a recovery from the coronavirus-induced economic slump faced a highly uncertain path, weighing on risk sentiment.

Spot gold was up 0.9% at $1,946.09/oz by 3.07am GMT, after falling more than 3.5% to a near one-week low on Wednesday. US gold futures fell 0.9% to $1,952.90.

“Gold is stable after it got hammered overnight. The main fundamentals behind gold have not changed,” said Edward Meir, an analyst at ED&F Man Capital Markets. “Stimulus is still coming in and it’s very premature to say we’re recovering globally and should see higher rates and a stronger dollar; we are months and months away from that.”

The Fed on Wednesday warned the economic downturn triggered by the Covid-19 pandemic faces a highly uncertain path and reiterated the need for additional fiscal stimulus. The dovish remarks from the Fed on the US economy triggered a retreat in US stocks and across Asian markets.

Central banks, including the Fed, have rolled out massive stimulus measures and cut interest rates near zero to combat the economic toll from the virus outbreak, helping gold rise more than 28% so far in 2020 as it is considered a hedge against inflation and currency debasement.

Keeping a check on gold’s advance, the dollar index rebounded and US treasury yields rose after the Fed minutes showed policymakers expressed little support to implement yield curve control to keep the cost of borrowing low.

“Gold remains sensitive to movements in the US dollar and US monetary policy expectations. The market proved quite disappointed by last night’’s federal open market committee minutes,” said IG Markets analyst Kyle Rodda.

Elsewhere, silver rose 1.2% to $27.05/oz, platinum climbed 0.8% to $938.81, and palladium gained 0.3% to $2,163.50.

Reuters