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Gold Falters in Ascent Toward $1,800, Buffeted by Rising Dollar

A resurgence in coronavirus cases risks impeding the recovery of the global economy and fans demand for haven assets.

Gold Falters in Ascent Toward $1,800, Buffeted by Rising Dollar
Gold bangles are seen for sale in a jewelry shop (Photographer: Kerem Uzel/Bloomberg)

Gold faltered in its ascent toward $1,800 an ounce as a strengthening dollar undercut demand for the metal.

Bullion futures rallied to just shy of the level last seen at the end of 2011, the year bullion notched its all-time high, as rising cases of Covid-19 globally bolstered investor enthusiasm for bullion as a haven. Gold erased gains early in the U.S. session as a gauge of the dollar advanced, reducing the appeal of the metal as an alternative asset.

“This morning we got a little bit of a pop in the dollar, and gold came down right after it,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said by phone Wednesday. Still, the dollar’s jump may be short-lived, given Federal Reserve stimulus expectations, and gold should rebound, he said.

Even with the prices fluctuations, gold is headed for its best quarter since early 2016, benefiting from economic stimulus globally, simmering U.S.-China trade frictions and renewed concern over economic fallout from the coronavirus. On Wednesday, the International Monetary Fund downgraded its outlook for the world economy, projecting a significantly deeper recession and slower recovery than it anticipated just two months ago.

Gold Falters in Ascent Toward $1,800, Buffeted by Rising Dollar

U.S. equities headed lower amid growing concerns about the resurgence in virus cases. City and state officials in Covid-19 hot spots across the U.S. are considering slowing or reversing reopening plans, while the European Union is weighing whether to keep a ban on Americans entering the bloc when external borders reopen. Meanwhile, trade tensions are flaring up between the U.S. and European Union.

Gold futures for August delivery slipped 0.4% to settle at $1,775.10 an ounce at 1:30 p.m. on the Comex in New York, after touching $1,796.10, the highest for a most-active contract in seven years. Futures peaked at $1,923.70 in September 2011. The dollar advanced 0.5% on Wednesday.

Holdings in exchange-traded funds backed by bullion have soared to a record, increasing almost 600 tons in 2020. With real U.S. interest rates negative, banks such as Goldman Sachs Group Inc. forecast gold will hit a record $2,000 in 12 months.

©2020 Bloomberg L.P.