Gold falls more than 1% as US dollar strengthens, lockdowns ease

[BENGALURU] Gold fell more than 1 per cent on Wednesday, pressured by a stronger US dollar and expectations that gold supplies will grow as bullion refineries resume operations, and on gradual improvement in investor risk appetite as countries have begun to ease coronavirus restrictions.

Spot gold dipped 1.1 per cent to US$1,686.50 per ounce by 1.44pm EDT (1744 GMT).

US gold futures settled 1.3 per cent lower at US$1,688.50, narrowing their lead over the London spot prices to just around US$2 after two of the world's biggest gold refiners said they are restoring almost all operations.

This ended six weeks of closures that disrupted global gold supply and helped drive prices in New York and London further apart than they have been in decades. Gold has risen about 11 per cent so far this year as the global economy has slumped during the pandemic.

"It's probably a combination of more supply coming in to the Comex, and probably a little bit less interest as risk appetite is growing and the US dollar rallies," said Bart Melek, head of commodity strategies at TD Securities. Many countries like Italy, Germany and the United States are tentatively easing lockdowns.

The S&P 500 and Nasdaq rose on hopes of a pickup in business activity as states eased coronavirus-induced curbs, with investors also looking past a stunning 20 million-worker plunge in US private payrolls last month.

Further denting gold's appeal, the US dollar index rose 0.3 per cent to a more than one-week high.

"You can't count out gold as dollar strength is not due to higher interest rates but weaker global currency outlook," George Gero, managing director at RBC Wealth Management, said in a note.

The outbreak, which has infected more than 3.68 million people globally, has battered global growth and prompted nations to unleash massive fiscal and monetary measures to limit economic damage.

Gold tends to benefit from widespread stimulus from central banks because it is considered a hedge against inflation and currency debasement.

Investors also kept a close eye on brewing US-China tensions over the origin of the coronavirus.

Reflecting investor interest, holdings in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to their highest level since April 2013.

Elsewhere, silver fell 0.7 per cent to US$14.91 per ounce and platinum dropped 1.8 per cent to US$751.05.

Palladium eased 0.3 per cent to US$1,795.00 per ounce after hitting its lowest level in over a month on Tuesday.

Prices of platinum group metals could fall 15 to 20 per cent in the near term on a rising surplus, Citigroup said in a note.

REUTERS