JOIN USGold gains as new wave of coronavirus infections raises further stimulus hopes
Gold prices rose on Monday, holding above the key $1,700 per ounce support level, as a new wave of coronavirus infections in some countries raised expectations of further stimulus measures and lower interest rates.
Spot gold gained 0.5% to $1,708.75 per ounce by 0325 GMT, having lost about 1% in the previous session. U.S. gold futures eased 0.1% to $1,711.70.
"People have bought the dip. Even in the best of circumstances, we are still in an environment where (interest) rates are going to remain very low, fiscal policies are going to remain very accommodative and inflation is going to be high," said IG Markets analyst Kyle Rodda.
Gold is poised to move higher in the longer term and investors are trying to get their hands on the metal before it rockets higher, he said, adding that there was a lot of technical support around the $1,700 level.
Massive stimulus measures tend to support gold as it is used as a hedge against inflation and currency debasement. Gains in bullion were limited, however, as the dollar firmed and Asian shares rose, with investors looking ahead to more countries restarting their economies, even as some reported an unwelcome pickup in new coronavirus cases.
Chinese authorities reported on Sunday what could be the beginning of a new wave of virus cases in northeast China, while South Korea warned of a second wave of new infections. Highlighting the impact of the pandemic, the U.S. economy shed a record 20.5 million jobs in April, a Labour Department report showed on Friday.
Americans should not expect a quick return to growth, U.S. Federal Reserve officials said last week. On the U.S.-China trade front, the International Monetary Fund on Friday warned Washington and Beijing against rekindling a tariff war that could weaken recovery from the pandemic, while signalling a possible downward revision of global economic forecasts.
Speculators reduced their bullish positions in COMEX gold contracts in the week to May 5, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday. Among other metals, palladium gained 1.1% to $1,902.46 an ounce, platinum rose 0.7% to $770.20 and silver climbed 0.4% at $15.51.