Gold steadies as fresh coronavirus lockdowns offset firm US dollar

Gold prices steadied in a tight range on Tuesday, as worries over rising Covid-19 cases across Europe countered pressure from a stronger US dollar ahead of key speeches by Federal Reserve policymakers this week. Spot gold was up 0.1 per cent at $1,914.28 per ounce by 0431 GMT, after dropping more than 3 per cent to at $1,882.70, its lowest level since Aug. 12 on Monday. US gold futures gained 0.5 per cent to $1,919.70 on Tuesday.

Earlier in the day, a firmer US dollar dented gold's appeal, with the dollar index holding on to overnight gains against its rivals. A firmer dollar makes bullion more expensive for holders of other currencies. "Gold is now more sensitive to the US dollar rather than any other factors," said Margaret Yang, a strategist with DailyFx, which covers currency, commodity and index.

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But offering support to gold were concerns about fresh lockdowns in Europe, which has reported a surge in virus cases. Doubts about a swift economic recovery also kept investors away from riskier assets.

"In the near-term, gold may struggle to hold gains above $1,900 ... In the event that it breaks down $1,900 it may open more room to the downside towards maybe $1,870," she added. Investors are now eyeing speeches by Fed committee members, including Chairman Jerome Powell, who will appear before Congressional committees this week.

"Central banks would continue to have major concerns about economic growth," Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note. "Ultra-low yields and negative real interest rates will remain as they are now for much longer, this should provide support for the gold prices in the longer term." Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Gold, which has risen nearly 26 per cent this year, is also widely viewed as a hedge against inflation and currency debasement. Elsewhere, silver was flat at $24.73 per ounce, platinum was up 1.2 per cent at $891.75 and palladium rose 0.9 per cent to $2,293.71.