Gold steadies after nine-day rally as Fed flags risk from virus

[SINGAPORE] Gold paused after rallying for nine days to a record as investors weighed comments from the Federal Reserve on uncertainties over the economic recovery amid the coronavirus pandemic.

Bullion was supported as the US central bank left interest rates near zero and vowed to use all its tools to drive the recovery from the downturn that chair Jerome Powell called the most severe "in our lifetime".

He sounded a dour tone, noting that more fallout from the outbreak still lies ahead. US deaths surpassed 150,000, the highest official toll in the world.

Gold has soared almost 30 per cent to a record this year as the pandemic drove demand for havens amid a weaker dollar and low interest rates.

With more stimulus on the horizon, Goldman Sachs Group has said that bullion is the currency of last resort and forecasts a surge to US$2,300 an ounce. Real yields on 10-year US Treasuries are sinking toward -1 per cent.

"Gold should continue to rise higher after the Fed's promise to keep the stimulus coming," Edward Moya, senior market analyst at Oanda, said in a note. "The Fed's backstop is not going away, but if Congress botches the size and timing of the coronavirus relief bill, gold could consolidate before breaking beyond the US$2,000 level."

Another round of talks between the Trump administration and congressional Democrats Wednesday brought them no closer to a compromise on a virus-relief plan, as enhanced unemployment insurance for millions of out-of-work Americans runs out. In his remarks, Mr Powell said supporting the recovery would need help from both monetary and fiscal policy.

Data due Thursday are forecast to show US gross domestic product plummeted an annualised 34.8 per cent in the second quarter, the most in records dating back to the 1940s, after the spread of Covid-19 prompted Americans to stay home and states to order widespread lockdowns.

Spot gold was 0.3 per cent lower at US$1,964.79 an ounce at 11.16am in Singapore, after hitting an all-time high of US$1,981.27 on Tuesday. Gold futures traded 0.3 per cent higher at US$1,982.10 after peaking at US$2,000 this week.

Spot silver fell 0.3 per cent to US$24.2266 an ounce, and is down for a third day. The Bloomberg Dollar Spot Index steadied near the lowest in almost two years.

BLOOMBERG