Gold sprints to 9-year peak on softer dollar, stimulus bets

Gold jumped more than 1 per cent on Wednesday to its highest in nearly nine years, driven by a weaker dollar and as expectations of more stimulus to resuscitate pandemic-hit economies lifted the metal's appeal as an inflation-hedge.

Spot gold was up 0.9 per cent at $1,857.86 per ounce by 0232 GMT, after hitting its highest since September 2011 at $1,865.35 earlier in the session. US gold futures rose 0.8 per cent to $1,858.20.

"The spectre of these stimulus packages has pushed investors back into non-yielding assets like gold," said ANZ analyst Daniel Hynes.

"The likelihood of interest rates remaining low for the foreseeable future and the weaker US dollar have really boosted investor appetite."

European Union leaders on Tuesday sealed a 750 billion euro recovery plan, while White House officials and top congressional Democrats discussed a next round of relief that would include extended unemployment insurance and more money for schools.

Helping bullion's rally, the dollar index held near a more than four-month low. Coronavirus cases continued to surge in the United States, with President Donald Trump warning the virus would probably get worse before it gets better. Underscoring the pandemic's impact, Japan's factory activity contracted for a 15th straight month in July.

Central banks have slashed interest rates and rolled out a wave of stimulus measures to cushion the economic damage from the pandemic, helping gold prices surge over 22 per cent so far this year. "Gold markets continue to receive their jet fuel from two critical ingredients: government debt and central bank liquidity," Stephen Innes, chief market strategist at financial services firm AxiCorp, said in a note.

A Reuters poll showed the metal could push towards record highs over the next 18 months as the crisis encourages investors to hoard it as a hedge against possible turmoil in wider markets. Silver soared again, rising 5 per cent to $22.40 per ounce, its highest since October 2013. Palladium fell 1.2 per cent to $2,132.73 and platinum eased 0.1 per cent to $880.60.