Gold eases as risk sentiment improves on Fed debt-buying

Gold prices declined as risk sentiment improved after the U.S. Federal Reserve widened its program of buying corporate debt to combat the financial toll of the pandemic, however, growing worries about a second wave of coronavirus infections limited the downside.

Spot gold was trading 0.1 percent down at $1,723.20 per ounce by 0726 GMT, having touched a high of $1,744.91 on Thursday, its highest since June 2. On Monday, the metal fell more than 1 percent to a near 1-week low but retraced to close 0.33 percent down at $1725.15.

The U.S. Federal Reserve announced it would begin purchasing a diversified range of investment grade U.S. corporate bonds later in the day in a bid to protect companies’ access to cash and ensure credit market liquidity amid the coronavirus pandemic.

The Fed's announcement offset some concerns about a second wave of coronavirus infections that had weighed on investor sentiment. Coronavirus cases globally reached over 8 million on Monday, as infections increased in Latin America and the United States and China.

The Bank of Japan stated it expects to inject around 110 trillion yen to support the economy via its market operations and lending facilities, while the Reserve Bank of Australia in its June meeting minutes reiterated that the national economic downturn may not be as bad as initially feared.

The greenback against a basket of currencies traded 0.1 percent down at 96.54, having touched a low of 95.72 on Wednesday, its lowest since March 10. The benchmark U.S. 10-year Treasury yields notes edged up to 0.737 percent, while the spread between 2-year and 10-year yields widened to 53 basis points.

Investors now await Fed Chair Jerome Powell's testimony before a virtual hearing of the Senate Banking Committee at 1400 GMT.