GOLD rose, paring a weekly drop, as investors weighed a resurgence of cases in the United States and major European economies, and the prospects for coronavirus vaccines.
New York mayor Bill de Blasio said the city was ready for the possibility of closing its schools again, while California passed one million infections. In Europe, France and the United Kingdom reported the most infections yet, and Portugal extended restrictions. Even with the prospect of a Covid-19 vaccine, three of the world's top central bankers, including Federal Reserve chairman Jerome Powell, cautioned that a vaccine would not end the economic challenges.
In the coming quarters, factors supporting gold include low bond yields, a weakening US dollar due to loose fiscal and monetary policy, and geopolitical tension, said Fitch Solutions. In 2021, the metal's gains will be limited by a limited recovery and the rising odds of a vaccine approval, and prices are forecast to average US$1,850 an ounce, it said in a report.
"Gold has turned mixed as support from rising virus risks, mixed economic data from major economies, hopes of additional stimulus measures is countered by weaker investor buying, progress on a vaccine and concerns about US fiscal stimulus deal," said Madhavi Mehta, an analyst at Kotak Securities.
However, the outlook for gold remains positive amid increasing virus risks, which makes a case for continuing stimulus measures, she said.
Spot gold rose 0.2 per cent to US$1,879.73 an ounce at 2.44pm Friday, Singapore time, after climbing 0.6 per cent on Thursday. Prices are down 3.6 per cent this week. Silver was little changed. The Bloomberg Dollar Spot Index was steady after two days of gains.
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But while gold prices held firm in a narrow range on Friday, the metal was headed for its worst weekly loss since September, as hopes for a vaccine boosted risk assets earlier this week.
US gold futures gained 0.2 per cent to US$1,877.10.
"There has been a bit of shift in market psychology," ED&F Man Capital Markets analyst Edward Meir said, adding that people are realising a significant roll-out of a vaccine will take time, while the need for relief is immediate.
A Reuters tally showed novel coronavirus cases soared by more than 100 per cent in 13 US states in the past two weeks, while the global tally crossed 52.45 million, underpinning the need for more stimulus.
"The fact that there isn't a stimulus coming seems to be keeping a lid on it (gold) . . . If Congress actually comes up with a limited package, that would be beneficial," Mr Meir said.
Top Democrats in the US Congress urged renewed talks over a multitrillion-dollar coronavirus aid proposal, but a top Republican immediately rejected their approach as too expensive.
"Sentiment towards gold prices has eased significantly since they peaked in August, and prices would need a strong incremental bullish narrative to exceed the highs reached in 2020, which we struggle to find at this point," Fitch Solutions wrote in a note. BLOOMBERG, REUTERS
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