Gold rallies to 1-week peak on weaker dollar

Gold prices rallied to a 1-week peak on the back of a weaker dollar, although a rally in U.S. equities and signs of a recovery in global economic activity limited upside.

Spot gold was trading 1.1 percent higher at $2,007.56 per ounce by 0754 GMT, having hit a low of $1862.89 on Wednesday, its lowest since July 22. U.S. gold futures rose 0.5 percent to $2,008.75 per ounce.

Massive global stimulus to combat the COVID-19 pandemic and fuelling fears of inflation have helped the safe-haven metal rise more than 31 percent this year. 

Asian shares surged as optimism generated by Wall Street’s tech-driven rally offset U.S.-China tensions. The Nasdaq hit a record high on Monday, while S&P 500 reached close to its record level.

The dollar declined to a more than 2-year low, following a 2.6 basis point decline in benchmark U.S. 10-year government bond yields overnight and downbeat economic data.

Data released yesterday showed the New York Fed’s Empire State business conditions index tumbled to 3.7 in August from 17.2 in July.     

Coronavirus cases in Italy have doubled over the past two weeks, prompting the country to reimpose restrictions on bars and nightclubs. According to a Reuters tally, over 21.81 million people have been reported to be infected by the coronavirus globally and 770,518​ have died.

Tensions between U.S.-China intensified after U.S. President Donald Trump on Saturday said he could exert pressure on more Chinese companies such as technology giant Alibaba after he moved to ban TikTok. The Trump administration also announced it would further tighten restrictions on Chinese telecommunications firm Huawei, aimed at cracking down on its access to commercially available chips.

On Monday, U.S. President Donald Trump promised tax credits for firms who relocate manufacturing facilities to the United States from China.

Investors now await the minutes from the U.S. Federal Reserve’s last policy meeting due for release on Wednesday, which could possibly determine the next moves.

The greenback against a basket of currencies traded 0.2 percent down at 92.61, having touched a low of 92.51 earlier, its lowest since May 2018. The U.S. Treasury yields declined, with the benchmark 10-year note yield trading at 0.670 percent.