Gold prices lost nearly 1 per cent on 16 July, dipping below the key $1,800 level against a backdrop of a strengthened dollar and the “wait-and-see” stance adopted by the European Central Bank which is expected to keep interest rates unchanged.
Gold stabilized at around the key $1,800 level on Friday after tottering in the previous session, reported Reuters.
Spot gold was up by 0.1 percent at $1,799.18 per ounce by 0710 GMT, with US gold futures showing similar signs of stabilizing at $1,799.90.
The stabilization came after gold slid below $1,800 on Thursday as the dollar strengthened and the European Central Bank took a pause after a spate of monetary measures to prop up the euro zone during the pandemic-induced recession.
Spot gold fell by 0.8 per ent to $1,796 per ounce, while US gold futures settled down 0.7 percent at $1,800.30.
Gold’s safe-haven appeal has been boosted by a fresh spike of COVID-19 cases and flaring US-China tensions, claim market analysts.
The US hit yet another all-time record on Thursday, surpassing 75,000 daily coronavirus cases, according to a New York Times database, with Johns Hopkins University’ suggesting the number of new cases for the 24-hour period was 68,428.
A stronger US dollar has also been keeping gold prices in check.
‘Very Deep Hole’
The lure of non-yielding bullion is also suggested as being furthered by lower US interest rates amid an economy struggling to bounce back.
It might take years to recover from the damaging COVID-19 pandemic fallout that has driven the US economy into a “very deep hole,” said New York Fed President John Williams on 16 July in an interview for Yahoo Finance, adding that now was not the time to think about raising interest rates.
He also underscored that the health crisis had created such an “enormous amount of uncertainty”, that even if the US economy were to start to recover in the second half of 2020, there was “a long way to go to get back to full strength.”
As most of the 50 states in the US imposed lockdown protocols to stem the spread of the pandemic, the economy shrank 5 percent in the first three months of 2020, in the sharpest decline since the Great Recession of 2008/09.
Despite most businesses reopening over the past two months, a “double-digit recession” by the second quarter is imminent, warn economists.