Gold up as US consumer sentiment dive eases early tapering fears

[BENGALURU] Gold rose more than 1 per cent on Friday after a survey showing that US consumer sentiment dived in early August calmed investor concerns over an early tapering of the Federal Reserve's asset purchases.

Spot gold rose 1.4 per cent to US$1,776.21 per ounce by 5.44pm GMT. US gold futures settled 1.5 per cent up at US$1,778.20.

The precious metal has recovered sharply after sliding to an over four-month low on Monday that was spurred by fears the Federal Reserve would begin cutting back economic support after a strong US jobs report last week.

"The crash in gold was a little overdone and we're beginning to see the reality that economic stimulus in the US and worldwide is going to continue," said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments.

In a sign of the potential economic impact of the fast-spreading Delta Covid-19 variant, the University of Michigan's preliminary consumer sentiment index was at a decade low in early August.

The US dollar and US benchmark 10-year treasury yields also weakened after the survey, bolstering the appeal of gold, which is non yield-bearing and becomes cheaper for holders of other currencies when the dollar falls.

Providing further support to bullion was increased physical demand, particularly from top consumers India and China.

"The hope is that India's demand recovery in particular is going to be a sustainable trend, keeping gold prices from breaking significantly lower," said TD Securities commodity strategist Daniel Ghali.

Elsewhere, silver rose 2.4 per cent to US$23.72 per ounce.

Silver could move higher in step with gold, especially given supply constraints in the physical gold market, Circle Squared's Mr Sica added.

Platinum rose 1 per cent to US$1,028.65 and palladium was up 1.2 per cent at US$2,654.76.

TD's Mr Ghali also said there was a possibility of significant substitution of palladium with platinum in automobile exhaust systems to curb emissions, potentially boosting platinum demand from 2022.

REUTERS