Gold prices gained on Tuesday as a US coronavirus aid package set for Senate approval boosted the metal's appeal as an inflation hedge, while a new coronavirus strain shutting down much of Britain lent further support.
Spot gold rose 0.4% to $1,882.94 per ounce by 0312 GMT, after slipping as much as 1.3% in the previous session as the new coronavirus strain rattled markets and investors opted for the dollar.
US gold futures rose 0.3% to $1,888.90 per ounce. "Heightened inflation expectations due to the US fiscal stimulus package have seen gold pick up as an inflation hedge," said Howie Lee, an economist at OCBC Bank.
The US House of Representatives voted to pass a $900 billion coronavirus aid bill, also attached to federal agency spending to avert a government shutdown. With the bill headed toward House passage, it would next be considered by the Senate, which is standing by in what is expected to be an overwhelming vote of approval.
Meanwhile, the dollar held firm and Asian shares inched lower as the new coronavirus strain in the UK prompted a lockdown affecting more than 16 million Britons and caused several countries around the world to shut their borders to Britain.
Uncertainties relating to the global economic outlook such as the current Covid-19 strain are likely to support gold going forward, Lee said, adding the metal could climb above $2,000 by the second quarter of 2021.
On the technical front, gold may drop to $1,862 per ounce again, as a bounce from $1,764.46 may have completed, according to Reuters analyst Wang Tao. Silver rose 1.1% to $26.45 an ounce. Platinum fell 0.4% to $1,005.10 and palladium gained 0.4% to $2,318.13.
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