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PRECIOUS-Gold fights back after steep decline as slowdown fears persist

Published 12/08/2020, 16:22
Updated 12/08/2020, 19:18

* Britain's economy shrank by a record 20.4% in Q2
* Interactive graphic tracking global spread of coronavirus:
open
https://tmsnrt.rs/3aIRuz7 in an external browser

(Updates prices)
By Sumita Layek
Aug 12 (Reuters) - Gold recovered on Wednesday after dipping
below the key $1,900 level earlier and a day after registering
its worst fall in seven years as bleak economic data underscored
concerns over a pandemic-led slowdown.
Spot gold XAU= climbed 1.4% to $1,937.42 per ounce by 1:55
pm EDT (1755 GMT), after declining as much as 2.5% earlier. U.S.
gold futures GCv1 settled up 0.1% at $1,949.
On Tuesday, gold slumped as much as 6.2%, for its worst
one-day fall since April 2013. Silver XAG= , which on Tuesday
declined 15%, its biggest fall since October 2008, on Wednesday
was 4.3% higher at $25.85.
"That decline was a healthy correction, it allows more
people to get in, so prices will rally again and by the end of
the year we'll see new all-time highs with gold at probably
$2,500 per ounce and silver at $35," said Phillip Streible,
chief market strategist at Blue Line Futures in Chicago.
"We have all the same fundamental factors that supports
gold," he said. "The U.S. Federal Reserve is going to remain
dovish for an extended period of time, they have already said
that they will allow inflation to rise above their targets."
Large stimulus measures tend to support gold, which is often
considered a hedge against inflation. Concerns over the economic damage caused by the pandemic as
Britain's economy shrank by a record 20.4% in the second quarter
buoyed gold's appeal along with a weaker dollar, which slid
0.3%. USD/

"The global economy still faces a host of problems which
have the capacity to support gold," James Steel, chief precious
metals analyst at HSBC said in a note.
"This includes geopolitical risks and ongoing monetary and
fiscal stimulation. These factors will cushion further
declines."
All eyes are on a U.S. coronavirus aid after talks between
White House and top Democrats in Congress broke down last week.
Elsewhere, platinum XPT= rose 0.7% to $936.36 per ounce,
while palladium XPD= gained 1.5% to $2,122.11.

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