Gold prices dropped on Monday, as the dollar hovered close to a more than one-week high, despite fears of a second wave of coronavirus infections in Beijing denting risk appetite. Spot gold was down 0.5 per cent at $1,720.56 per ounce as of 0640 GMT. US gold futures slipped 0.7 per cent to $1,725.30 per ounce.
“Gold is caught between two conflicting forces. One is the risk-off force weighing on stocks and industrial commodities and supporting bonds and gold,” said Michael McCarthy, chief strategist at CMC Markets.
“But against that we have a stronger US dollar.”
Gold prices jumped 2.6 per cent last week, marking their best week since April 10, as worries of a new wave of COVID-19 cases clouded hopes of economic recovery.
After weeks with almost no new coronavirus infections, Beijing has recorded dozens of new cases in recent days, while new virus cases and hospitalizations in record numbers swept through more US states.
Rising concerns about a resurgence of the disease dented risk sentiment among investors, sending Asian stock markets and oil prices lower.
“The economy is not doing well, we got COVID-19 again and a low interest rate environment, I think gold remains bid,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.
“But, we need significant policy input from the US Federal Reserve or governments to add that fourth level of stimulus to get gold to bounce higher.”
Underscoring the impact of the virus, data showed China’s industrial output expanded less than expected in May as the country struggles to get back on track.
SPDR Gold Trust holdings rose 0.1 per cent on Friday, while speculators cut their bullish positions in COMEX gold and silver contracts in the week to June 9.
Elsewhere, palladium was down 0.9 per cent at $1,901.68 per ounce, silver fell 2.1 per cent to $17.08, platinum eased 0.2 per cent to $803.77.