Gold rebounds from 5-month lows as virus fears outweigh vaccine cheer
Gold prices recovered from five-month lows on Tuesday as worries over spiking COVID-19 cases offset optimism around vaccine developments and nudged investors towards the precious metal.
Following sharp losses in the previous two sessions, spot gold rose 0.4 per cent to $1,784.37 per ounce by 0349 GMT. US gold futures gained 0.4 per cent to $1,787.90.
Gold clocked its worst monthly fall in four years on Monday, falling to $1,764.29 per ounce, the lowest level since July 2.
“Gold has been a crowded trade for quite a while, so we’re seeing a realignment of asset allocation away from gold and towards more risky assets as the (market) sentiment is improved,” said Michael Langford, executive director at corporate advisory and consultancy firm AirGuide.
“That being said, those flows can quickly reverse again as the economic situation becomes more apparent.”
Some Americans could begin receiving coronavirus vaccinations before Christmas, a top government official said on Monday, helping drive Asian shares higher after a record-breaking month.
Dimming the economic outlook, however, COVID-19 cases topped 1.1 million in the United States last week, with California weighing fresh curbs such as stay-at-home orders.
Investors’ focus now turns to Federal Reserve chairman Jerome Powell’s testimony before the Senate Banking Committee later in the day, which will offer clues on the direction of monetary policy.
If the US Federal Open Market Committee meeting in two weeks shows more monetary accommodation it will restoke inflationary fears, said Howie Lee, an economist at OCBC Bank.
The factors that drove bullion’s recent rally remain intact, Lee said, adding that he remained constructively bullish on gold and expects its rally to resume in 2021.
Non-yielding gold is seen as a hedge against inflation likely to result from large stimulus measures.
Silver gained 1.1 per cent to $22.86 an ounce, while platinum rose 1.8 per cent to $981.85 and palladium was up 0.4 per cent at $2,383.60.