Futures for gold early Monday were retreating somewhat as the dollar rose amid a global-market selloff at least partly attributed to fears of a new strain of coronavirus that was causing intensifying lockdown measures in parts of Europe and momentarily rattling risk appetite to start Christmas week trading.
Bullion has tended to slide, at least momentarily, as worries about the virus have caused broader selling in risk assets and a prompted some flight to cash and out of precious metals.
The viral spread was taking the spotlight away from Congress reaching an agreement on a roughly $900 billion coronavirus relief package, which has been viewed as a part of the near-term bullish thesis for bullion buying, supporting expectations for more government spending and deflating greenback.
Precious metals are seen as a hedge against currency-devaluing fiscal spending and gold, in particular, has benefited from that idea in recent trade, experts say.
“Buying sentiment towards the metal is likely to remain supported by coronavirus-related concerns and a weaker US Dollar,” wrote Lukman Otunuga, senior research analyst at FXTM, in a research note.
“Gold has appreciated almost 7% this month and could extend gains if bulls are able to maintain control above $1900. But this level could prove to be reliable resistance, which means a decline back towards $1850 would be on the cards,” the analyst wrote.
February gold
GCG21,
was trading $4.60, or 0.2%, lower at $1,884.30 an ounce, retreating from around its highest level since November after the metal on Friday logged 2.5% weekly gain based on the most-active contract for the metal.
Gold’s slide on Monday also comes as the U.S. dollar was regaining some lost ground after a steady retreat for the U.S. unit, as measured by the ICE U.S. Dollar Index
DXY,
The buck was up 0.7% at 90.666, as investors turned to bucks amid worries about a faster-spreading coronavirus strain and tightened lockdown measures in Europe.
A stronger dollar can make assets priced in the currency, like gold, more expensive to commodity buyers using other currencies.
March delivery
SIH21,
meanwhile, rose 45 cents, or 1.7%, to trade at $26.48 an ounce, after it put in a weekly gain of 8.1% on Friday, making its best weekly climb in a month and a half, FactSet data show.
