Published on 1/12/2020 5:49:58 PM | Source: Reuters

Gold bounces off five-month low on weaker dollar virus woes

Posted in Top Stories| #Gold #US dollar #Commodity

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By Eileen Soreng

(Reuters) - Gold rose 1% on Tuesday, rebounding from a five-month trough in the previous session, on a weaker dollar and as rising coronvirus cases overshadowed some of the optimism for a quicker vaccine-fulled economic recovery.

Spot gold rose 1.1% to $1,796.61 per ounce by 1034 GMT. U.S. gold futures gained 1% to $1,800.20.

The metal clocked its worst monthly fall in four years on Monday, slipping to $1,764.29, the lowest since July 2, as investors flocked to riskier assets such as equities.

"Gold seems to be deriving strength from a tired dollar and mixed comments from U.S. Federal Reserve Chair Jerome Powell and Treasury Secretary Steve Mnuchin," said Lukman Otunuga, senior research analyst at FXTM.

"Concerns over spiking coronavirus cases are also contributing to the metal's upside despite the growing optimism around vaccine developments."

In remarks released on Monday, Powell said the U.S. is entering "challenging" few months, while a potential vaccine faces challenges of production and mass distribution before its economic impact becomes clear.

Meanwhile, the U.S. recorded 10,000 coronavirus deaths and over 1.1 million new cases last week.

Making gold cheaper for investors holding other currencies, the dollar fell, pressured by expectations of more U.S. economic stimulus, with attention turning to Powell's testimony before the Senate Banking Committee later in the day.

Underlying drivers for gold has not changed, including the dollar, and movements in real yields, which are still at their lowest in about a month, said Saxo Bank analyst Ole Hansen.

Non-yielding gold has risen 18% so far this year, given its appeal as a hedge against inflation spurred by the unprecedented stimulus measures unleashed to ease the pandemic's economic blow.

Bullion also remains supported by physical demand from India and China at current levels, said independent analyst Ross Norman.

Silver gained 2.3% to $23.13 per ounce, while platinum rose 1.5% to $979.32 and palladium was up 1.3% to $2,403.93.


(Reporting by Eileen Soreng in Bengaluru, editing by Louise Heavens)