Gold rebounds from 3-week trough on U.S. stimulus uncertainty
Gold prices rebounded from a 3-week trough hit earlier in the session as the greenback eased from recent peaks on growing uncertainty about a U.S. stimulus deal.
Spot gold surged 0.9 percent to $1,930.03 per ounce by 0920 GMT, having hit a low of $1862.89 earlier, its lowest since July 22. The metal fell nearly 2.6 percent below the $1,900 per ounce level in early trade as a resurgent dollar prompted investors to reassess their positions after a record-breaking price rally. U.S. gold futures declined 0.5 percent to $1,936.70.
Gold suffered a near 6 percent decline on Tuesday, its biggest 1-day drop in more than seven years as equities surged and the dollar firmed. Moreover, a rise in U.S. Treasury yields helped the dollar regain some ground.
The dollar index rose to an over 1-week peak, however, it failed to sustain gains on growing uncertainty over whether the U.S. lawmakers would agree on an additional fiscal stimulus to support an economy still struggling with the novel coronavirus.
On Tuesday, U.S. Senate Republican leader Mitch McConnell said White House negotiators have not spoken with Democratic leaders in Congress on coronavirus aid legislation after failed talks last week.
Investors risk sentiment slightly improved on hopes of vaccine development. President Vladimir Putin said that Russia had grant regulatory approval to a COVID-19 vaccine after less than two months of human testing.
The dollar extended its recent rally as U.S.-China tensions intensified following President Donald Trump’s ban on TikTok and WeChat. China imposed sanctions on 11 U.S. citizens, including Republican lawmakers, following Washington’s sanctions on Hong Kong and Chinese officials
The U.S. election campaigns look set to gather steam after Democratic presidential candidate Joe Biden selected Senator Kamala Harris as his choice for vice president.
The greenback against a basket of currencies traded 0.2 percent down at 93.50, having touched a high of 93.91 earlier, its highest since August 4. The U.S. Treasury yields surge, with the benchmark 10-year note yield trading at 0.664 percent.
On data front U.S. inflation figures are due later in the day, which are expected to show consumer price growth edged down to 1.1 percent on a year-on-year basis from 1.2 percent in June.
Investors also look for signs that the political impasse in Washington over the next stimulus programme can be overcome.