SINGAPORE: Gold prices touched a six-week low on Wednesday, as the dollar strengthened with the coronavirus crisis rattling sentiment in Europe, while investors grew wary of further stimulus from the US Federal Reserve.
Spot gold fell 1% to $1,880.46 per ounce by 0641 GMT. Earlier in the session, bullion hit its lowest since Aug. 12 of $1,873.70.
US gold futures were down 1.5% at $1,879.10.
“We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term,” said Howie Lee, economist at OCBC Bank.
Also weighing on sentiment were mixed signals from Chicago Federal Reserve President Charles Evans, who on Tuesday said the US economy risks a longer, slower recovery and “recessionary dynamics” if Congress fails to pass an additional fiscal stimulus package.
It is possible for the Fed to raise interest rates before inflation starts to average 2%, Evans added.
Meanwhile, US economic policymakers opened the door to further aid for small businesses hit by the coronavirus, but provided no quick path.
“We are also seeing a slight pessimism about US fiscal stimulus and that has probably curbed inflation expectations just a little bit,” said IG Markets analyst Kyle Rodda.
Gold, viewed as a hedge against inflation and currency debasement, surged about 24% this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.
The market is still expecting changes in policy settings that could lead to a stronger gold price overtime but that is a longer-term view, he added.
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