[BENGALURU] Gold prices edged higher on Tuesday as dollar slipped, while investors weighed concerns over spiking coronavirus cases globally against optimism over positive developments around a second possible Covid-19 vaccine.

Spot gold rose 0.1 per cent to US$1,890.27 per ounce by 3.27am GMT, while US gold futures were up 0.1 per cent at US$1,889.70.

Bullion dropped as much as 1.3 per cent on Monday after drugmaker Moderna said its experimental vaccine was 94.5 per cent effective in preventing Covid-19 based on interim data from a late-stage trial, becoming the second US drugmaker after Pfizer to report results exceeding expectations.

"Traders are striking a balance between the positive vaccine breakthrough and the prospect of lower fiscal stimulus in the quarters to come," said Margaret Yang, strategist, DailyFX.

But monetary environment is still very accommodative and may stay at current levels into spring of 2021 providing near-term support for gold prices, she added.

The dollar index was down 0.2 per cent, helping bullion gain.

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While Federal Reserve vice-chair Richard Clarida on Monday acknowledged the successful tests of two coronavirus vaccine candidates as a positive for US economic recovery, he also said that the central bank will apply an expansive view of the labour market in any discussion of potential rate hikes.

President-elect Joe Biden called on Congress to come together and pass a new coronavirus relief package, while new restrictions were placed in several US states to curb a surge in cases.

If stimulus programmes are larger than what was expected, it would weaken currencies and boost gold, said Michael Langford, executive director at corporate advisory and consultancy firm AirGuide.

Gold, considered a hedge against inflation and currency debasement, has gained over 24 per cent this year, mainly benefitting from global stimulus measures to cushion the effect of the pandemic.

Silver fell 0.1 per cent to US$24.73 per ounce. Platinum eased 0.5 per cent to US$920.56, while palladium was down 0.2 per cent at US$2,327.39.

REUTERS