Gold rally sputters with bets on vaccine, economies denting ETFs

[NEW YORK] The rally in gold, which surged to an all-time high two weeks ago, is showing signs of losing steam with hopes for a coronavirus treatment and signs of improving economies undercutting the metal's appeal as a haven.

Bullion posted back-to-back weekly losses for the first time since June, and on Monday headed for its third decline in four sessions.

Gains in holdings of gold exchange-traded funds (ETFs), a key driver of the metal's surge this year, have also slowed. Inflows into SPDR Gold Shares, the top ETF backed by the metal, have been flat for four straight sessions, the longest run in two months.

Gold has slipped about 7 per cent from a record on Aug 7, buffeted by improvements in some US and Chinese economic indicators and speculation that efforts to expedite virus treatments could soon yield results.

Investors are awaiting Federal Reserve chair Jerome Powell's speech Thursday at the Jackson Hole Economic Policy Symposium. Last week, Fed policy makers panned the yield-curve control idea that had helped bolster bullion.

"Gold is continuing to consolidate following its rapid rise until the start of August," Commerzbank analyst Carsten Fritsch said in a note Monday. "'This can also be seen in the wait-and-see attitude of ETF investors. The gold price is likely to find it hard to make further gains without any impetus in the form of ETF demand."

Bullion has risen about 27 per cent this year, making it one of the best-performing commodities, on massive liquidity injections from central banks and governments trying to help economies to recover from the virus pandemic. But risk-on sentiment in broader markets is now eroding those gains, with equities surging to new highs and Treasury yields starting to recover this month.

The US Food and Drug Administration confirmed Sunday that it had cleared a coronavirus treatment that involves blood plasma donated by people who've recovered from Covid-19.

Separately, the Financial Times reported that Donald Trump is considering whether to bypass normal US regulatory standards to fast-track an experimental vaccine from the UK for use in the US before November's election. Meanwhile, Moderna said it plans to provide 80 million doses of its experimental coronavirus shot to the European Union.

The news on possible treatments "should be bullish for the dollar and bearish for gold", Edward Meir, an analyst at ED&F Man Capital Markets in New York, said by phone Monday.

Mr Meir expects the metal will trade will trade from US$1,870 an ounce and to US$2,000 for the time being, with markets weighing Jackson Hole, coronavirus cases and the US dollar.

"This is just sort of a brief setback, but we need to consolidate for a while", he said. "You do need to get some consolidation as investors evaluate what's next."

Spot gold fell 0.6 per cent to US$1,929.06 at 1.51pm in New York. Futures for December delivery fell 0.4 per cent to settle at US$1,939.20.

In other precious metals, silver, platinum and palladium also declined.

BLOOMBERG