Gold steadies near eight-year high as virus cases surge

An employee holds a 1kg gold bar at AGR (African Gold Refinery) in Entebbe, Uganda

Gold prices held steady near an eight-year high on Tuesday as investors weighed a spike in COVID-19 cases around the world against a survey showing a rebound in U.S. services industry activity and expectations of a revival in China’s economy.

Spot gold was almost unchanged at $1,783.56 per ounce by 0652 GMT, just $5.40 shy of a near eight-year high hit last week. U.S. gold futures edged 0.1% higher to $1,794.40.

“The proliferation of new COVID-19 cases globally has added to lingering nerves, with investors preferring to hedge that risk via gold, even as they load up on equities again,” said Jeffrey Halley, a senior market analyst at OANDA.

India on Monday overtook Russia to record the world’s third-highest number of COVID-19 cases, while U.S. coronavirus deaths crossed 130,000.

Gold also followed moves in the dollar index, which recouped some losses, but still held near a two-week low. A stronger dollar makes the metal more expensive for those holding other currencies.

Meanwhile, growing expectations of an economic rebound in China and better-than-expected U.S. services sector data lifted investor sentiment towards riskier assets.

“Gold remains at risk of a short-term correction, given current market positioning,” said IG Markets analyst Kyle Rodda.

“Nevertheless, a break above $1,800 is on the cards, with buyers probably waiting on the other side of that level. In the bigger picture, fundamentals remain very constructive for gold.”

Indicative of sentiment, speculators increased their bullish positions in COMEX gold and silver contracts in the week to June 30.

Elsewhere, palladium dropped 1.2% to $1,915.88 per ounce, while platinum gained 0.7% to $818.84.

“Auto sales have turned positive in China, but revival in other countries looks uncertain. Weak sales will keep auto catalyst demand soft this year,” ANZ analysts wrote in a note.

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