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Gold Holds Firmer on Soft Dollar

November 11, 2020

Gold prices edged higher at the start of Wednesday’s session after support from a softer dollar. Despite concerns over surging COVID-19 cases in the United States, and the challenges over the distribution of a potential vaccine further strengthened gold’s appeal for investors.

Spot gold prices had risen by 0.3% to $1,882.06 per ounce at the start of the day. U.S. gold futures were up 0.2% at $1,880.20. The U.S. dollar index (DXY) was down 0.1% against a basket of currencies, meaning gold is now more attractive for other currency holders.

“The initial vaccine being proposed isn’t realistic… COVID-19 is still a problem, and ultimately there will be further forms of stimulus, and this will be positive for gold and negative for the dollar,” said Michael Langford, executive director at corporate advisory and consultancy firm AirGuide.

Federal Reserve policymakers said yesterday that surging coronavirus cases have threatened further to slow down U.S. economic growth in the coming months and that a more targeted government aid plan was needed. California and several states across the U.S. Midwest increased restriction measures as infections spiked.

Spot gold prices had fallen by 4.6% on Monday, its biggest daily fall since August 11th, after drugmaker Pfizer said its COVID-19 vaccine was more than 90% effective, based on initial trial results. This breakthrough, however, has led to widespread concerns over the logistical challenges of distributing hundreds of millions of doses after the vaccine is deemed safe for the general public.

“On reflection, the question marks about the production, distribution and actual performance of the vaccine were enough to convince investors that in the short term, central banks and governments are likely to keep fiscal and monetary policies uber-easy,” ANZ has said.

So far this year, gold has risen 24%, as it is considered a hedge against inflation and currency debasement amid the unprecedented levels of stimulus money globally. Silver climbed 0.8% to $24.40 per ounce. Platinum rose 0.6% to $888.66, while palladium was up 0.5% at $2,465.95.

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