Gold firms as stimulus hopes, virus woes support appeal

[BENGALURU] Gold prices firmed on Tuesday after falling as much as 5.2 per cent in the previous session, as hopes of more US stimulus measures to cushion the Covid-19 pandemic hit bolstered the precious metal's appeal as an inflation hedge.

Spot gold climbed 1 per cent to US$1,880.41 per ounce by 3.52am GMT.

It fell to US$1,849.93, its lowest level since Sept 28, on Monday after US drugmaker Pfizer said its experimental Covid-19 vaccine was more than 90 per cent effective, based on initial trial results.

US gold futures were up 1.3 per cent at US$1,878.90.

Central banks are unlikely to change their accommodative stance in the near to medium term as it will take time for a vaccine deployment and the subsequent pick-up in growth, inflation and labour market, said Lachlan Shaw, head of commodity research at National Australia Bank.

"If inflation expectations pick-up as a result of increased economic activity from the vaccine, that should keep a lid on long US real yields and be a supporting driver for gold."

While optimism over coronavirus vaccine development boosted risk appetite, uncertainties continued to loom over the impact of surging Covid-19 cases in the United States and Europe.

"I still think we've got more stimulus coming and the Fed will keep rates low, while a vaccine is going to provide that reflationary impulse... That's why the markets are still holding onto gold," said Stephen Innes, chief global market strategist at financial services firm Axi.

Dallas Federal Reserve Bank president Robert Kaplan said on Monday the resurgence of Covid-19 poses downside risks to the US economy, while Cleveland Fed president Loretta Mester said the central bank's emergency lending programmes are still needed.

Silver rose 0.5 per cent to US$24.19 per ounce. Platinum gained 0.4 per cent to US$869.61 and palladium was 0.6 per cent higher at US$2,492.32.

REUTERS