Gold prices rose on Tuesday, supported by fears of a global recession and a wave of central bank stimulus measures, while an uptick in risk appetite after a positive report on a potential COVID-19 vaccine limited bullion's advance.
Spot gold was up 0.1 percent at $1,733.04 an ounce by 1120 GMT. U.S. gold futures were steady at $1,733.50. Gold had slipped from a multi-year peak on Monday after drugmaker Moderna said its COVID-19 experimental vaccine showed promising results in a preliminary trial, lifting U.S. equities and oil prices.
Price Support Came in the Form of Massive Stimulus Measures
However, price support has come in the form of massive stimulus measures from central banks in an effort to limit the economic damage caused by the virus. Gold tends to benefit from such a stimulus because the metal is widely viewed as a hedge against inflation and currency debasement.
"Right now, the market is focused on the aftermath of the big rally in stock markets yesterday ... but the underlying demand has not gone away," said Saxo Bank analyst Ole Hansen. "We are looking at a weaker economic outlook, massive central bank measures and tensions on the geopolitical front, which should keep gold prices high."
France and Germany Proposed a 500 Billion Euro Recovery Fund
In the latest on damage control, France and Germany proposed a 500 billion euro ($543 billion) recovery fund that would offer grants to European Union regions and sectors hit hardest by the virus. Federal Reserve Chairman Jerome Powell, who at the weekend said that a U.S. economic recovery could stretch deep into next year, is due to speak before the Senate Banking Committee on Tuesday to discuss economic rescue efforts.
Raising fears of a further deterioration in China-U.S. relations, Nasdaq Inc NDAQ.O is set to unveil new restrictions on initial public offerings, which will make it more difficult for some Chinese companies to list there, sources said.
"Central bank's worrisome balance sheet expansion is unequivocally one of gold's primary drivers. And hedging against an escalation in U.S. trade tensions also seems like a great idea," Stephen Innes, chief market strategist at financial services firm AxiCorp, said in a note.
Innes pointed to interest rates near 0 percent and said that the U.S.-China trade war could also be "paving the way higher with gold bars". Elsewhere, palladium dropped 0.6 percent to $2,001.75 an ounce, having jumped more than nine percent at one point on Monday. Platinum fell 0.1 percent to $810.43 and silver shed 0.5 percent to $17.09.