Gold steady on hopes of delayed Fed taper

Bengaluru — Gold prices were steady near recent highs on Tuesday, supported by expectations that the US Federal Reserve would delay a tapering in its pandemic-era asset purchases, while the European Central Bank’s meeting this week was also in focus.

Spot gold was steady at $1,823.92 an ounce by 3.36am GMT, while US gold futures fell 0.4% to $1,826.20.

Prices had hit a two and a half-month high last week, after soaring Covid-19 cases driven by the Delta variant slammed a recovery in US job growth in August.

“The worse the spread of Covid-19, the higher the probability for gold prices to rise. Gold is a beneficiary of bad news and inflation until reserve banks cease or reduce easing,” said Michael Langford, director at corporate advisory AirGuide.

A strong labour market is a prerequisite for the US central bank to start withdrawing its stimulus measures, with Federal Reserve chair Jerome Powell indicating last month that the bank would remain cautious in its decision to raise interest rates.

Some investors view gold as a hedge against the inflation that may follow stimulus measures, while lower interest rates reduce the opportunity cost of holding non-yielding bullion.

The ECB will meet on Thursday and is likely to debate a cut in its stimulus measures as the eurozone economy roars back to life.

“We’ve got the two biggest central banks probably moving towards taper, but they’re still going to be dovish as far as raising interest rates … I continue to think this is what’s supporting gold when it drops,” said Stephen Innes, managing partner at SPI Asset Management. “I’m looking at fundamental topside support at $1,839, a break of $1,839 gives us clear sailing above $1,850.”

The dollar index hovered near a one-month low.

Silver fell 0.1% to $24.65 an ounce, platinum rose 0.2% to $1,020.59 and palladium inched up 0.1% to $2,412.13.