Gold rallies on easing dollar, U.S. China tensions, stimulus bets

Gold prices surged, hovering towards a near a 9-year high and were poised for its biggest weekly gain in more than three months, benefiting from a weak dollar and inflation expectations due to stimulus measures for coronavirus-hit economies.

Spot gold was trading 0.4 percent higher at $1,895.02 per ounce by 0918 GMT, having hit a high of $1,898.37 on Thursday, its highest since September 2011. The safe-haven metal has risen more than 4 percent this week, putting gold on course for its longest winning streak since late 2011. U.S. gold futures rose 0.2 percent to $1,893.25.

Rising U.S.-China tensions, widespread stimulus measures from central banks and downbeat unemployment data prompted investors to seek safety in bullion.

Beijing ordered the United States to close its consulate in the southwestern city of Chengdu, in retaliation for the closure of its consulate in Houston and Texas earlier this week. U.S.-China ties have deteriorated in recent months over issues ranging from the COVD-19 pandemic, which began in China, to Beijing trade and business practices, its territorial claims in the South China Sea and its security law on Hong Kong.

The European Union's agreed on a 750 billion-euro recovery fund to support economies hit hardest by the coronavirus. The dollar index declined to a more-than 4-month low as U.S. law makers struggled to agree on a new round of stimulus measures ahead of the expiry of some unemployment benefits.

Data released on Thursday showed, the number of Americans filing for unemployment benefits unexpectedly increased last week for the first time in nearly four months, suggesting the labor market was stalling amid a resurgence in new COVID-19 cases.

U.S. coronavirus cases topped 4 million on Thursday, with over 2,600 new cases every hour on average, the highest rate in the world, according to a Reuters tally. U.S. Senate Republicans plan to propose another round of direct payments to Americans in the next coronavirus relief bill, a senior aide stated.

The greenback against a basket of currencies traded 0.1 percent down at 94.68, having touched a low of 94.57 earlier, its lowest since September 2018. The U.S. Treasury yields edged higher, with the benchmark 10-year note yield trading at 0.587 percent.

Investors now await the U.S. Purchasing Managers Index figures due later in the day for a read on economic recovery progress.