October 07, 2020
Gold claws back as economic uncertainty lifts appeal
Reuters) - Gold prices edged up on Wednesday, after hitting a one-week low in early trade, lifted by renewed fears over economic recovery and uncertainty around the U.S. presidential election after President Donald Trump’s COVID-19 diagnosis.
Earlier in the day, spot gold hit its lowest since Sept. 28 at $1,872.66 per ounce. Bullion prices climbed 0.3% to $1,882.12.
U.S. gold futures were down 1.2% at $1,886.30.
The low interest rate environment globally along with uncertainties stoked by the upcoming U.S. elections bodes well for gold, said Brian Lan, managing director at dealer GoldSilver Central in Singapore.
However, “if U.S. dollar strengthens more we will see it cap gold prices.”
The U.S. 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 Nov. 3 election.
The announcement stoked risk aversion, while bolstering the U.S. 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 .DXY was last up 0.2% against rivals.
Trump’s decision to call off stimulus talks increases downside risks for an already shaky U.S. economy, which is likely to favour safe-harbour flows into the dollar, in which the bullion is priced.
Meanwhile, top U.S. 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 U.S. Federal Reserve’s Sept. 15-16 policy meeting and vice presidential debate due later in the day.
On the technical front, spot gold may revisit its Sept. 24 low of $1,847.57 per ounce, according to Reuters technical analyst Wang Tao.
Silver rose 1.5% to $23.43 per ounce, platinum was up 1.3% at $859.05, while palladium climbed 0.4% to $2,351.30.