2-3 minutes - Source: CNBC
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Gold rose 1% on Tuesday, following a sharp slide in the last session, as focus returned to the likelihood of more monetary stimulus to revive a global economy still reeling from the Covid-19 pandemic.
Spot gold climbed 1.1% to $1,881.39 per ounce by 0605 GMT, while U.S. gold futures were up 1.3% at $1,878.70.
Prices slumped as much as 5.2% on Monday after U.S. drugmaker Pfizer Inc said its experimental Covid-19 vaccine was more than 90% effective based on initial trial results.
Central banks are unlikely to change their accommodative stance in the near to medium term as it will take time for a vaccine deployment and a pick-up in growth, inflation and labor market, said Lachlan Shaw, head of commodity research at National Australia Bank.
“If inflation expectations pick up as a result of increased economic activity from the vaccine, that should keep a lid on long U.S. real yields and be a supporting driver for gold.”
Gold tends to benefit from widespread stimulus as it is considered a hedge against inflation and currency debasement.
While vaccine optimism boosted risk appetite, uncertainties continued to loom over the impact of surging Covid-19 cases in the United States and Europe.
“I still think we’ve got more stimulus coming and the Fed will keep rates low, while a vaccine is going to provide that reflationary impulse... That’s why the markets are still holding onto gold,” said Stephen Innes, chief global market strategist at financial services firm Axi.
Dallas Federal Reserve Bank President Robert Kaplan said on Monday the resurgence of Covid-19 poses risks to the economy, while Cleveland Fed President Loretta Mester said the Fed’s emergency lending programs are still needed.
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