Gold price set for biggest weekly jump in 20 months on haven demand
The precious metal has surged around 30% so far this year, supported by healthy central bank buying.
Gold prices fell below $1,900 an ounce on Tuesday as the dollar rallied on an impasse over US stimulus. Investors also latched onto a slightly less stark economic report card from the International Monetary Fund, which alleviated some of the economic concerns surrounding the covid-19 crisis.
Spot gold fell 1.5% at $1,894.73 per ounce by 11:55 a.m. EDT, after falling by as much as 1.9% earlier in the session. US gold futures lost 1.6% to $1,898.00 per ounce in New York.
Meanwhile, the US dollar jumped 0.4% against rivals on Tuesday, making bullion more expensive.
“The stagnation in Washington over the next stimulus package continues to pressure assets like gold that were relying on the weakness in dollar for the next wave of support,” David Meger, director of metals trading at High Ridge Futures, told Reuters.
Gold has risen 25% this year amid unprecedented global levels of stimulus during the pandemic
“The IMF and other agencies like US Federal Reserve have also noted that recovery has taken place a little quicker than they originally anticipated, so that would lead us to believe that there could be a need of lesser stimulus worldwide,” Meger said.
US House Speaker Nancy Pelosi said the latest coronavirus stimulus package offer by President Donald Trump fell short of what people need.
“Gold has been toyed with” during negotiations for the fiscal stimulus deal, with the latest deadlock “taking away some of the short term bullish drivers we anticipated,” said Edward Moya, a senior market analyst at OANDA.
“But all that means is that we’re going to get the stimulus later, probably early next year and that will lead to higher gold prices,” Moya added.
Frank Holmes, CEO of U.S. Global Investors, echoed the same sentiment:
“With the national debt now topping $27 trillion, such a package isn’t good for the government’s balance sheet, but it’s good for gold”
Investment in bullion remains strong. Last week, ETFs backed by physical gold climbed to a record amount, touching 111.05 million ounces. According to the World Gold Council (WGC), global gold ETFs saw their 10th straight month of inflows in September.
Earlier on Tuesday, the IMF said forecasts for the global economy were “somewhat less dire” as western countries and China rebounded more quickly than expected. This served as a silver lining for investors who were expecting the worst.
In its latest World Economic Outlook report, the IMF projected that the global economy would contract 4.4% in 2020, a slight improvement from the group’s midyear projection, the New York Times reported.
Gold, considered a hedge against inflation and currency debasement, has already risen 25% this year amid unprecedented global levels of stimulus during the pandemic.
(With files from Reuters)
