Gold steadies as dollar tepid ahead of Trump-Biden debate
· Gold prices held steady on Tuesday as the U.S. dollar retreated from a two-month high, with investors looking forward to the first U.S. presidential debate and developments on a new U.S. coronavirus relief bill.
· Spot gold was little changed at $1,880.01 per ounce by 0517 GMT. Prices rose 1.1% in the previous session, its biggest one-day gain since late August.
· U.S. gold futures were up 0.2% at $1,885.50.
· The dollar index was tepid, drifting away from a two-month high of 94.745 reached last week.
· A weaker dollar makes gold cheaper for holders of other currencies.
“The dollar’s decline has helped gold as the correlation remains relatively strong,” said Howie Lee, an economist at OCBC Bank, pointing also to prospects of further fiscal stimulus in the United States.
“If that bill gets passed before the November elections, I think that will help risk sentiment. Gold may be pushed higher by virtue of the dollar weakening and heightened inflation expectations.”
· U.S. House of Representatives Speaker Nancy Pelosi said on Monday that Democratic lawmakers unveiled $2.2 trillion relief bill. But it wasn’t specified when there would be a vote on the proposal.
· Gold, viewed as a hedge against inflation and currency debasement, has risen over 20% this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.
· Caution had also set in ahead of the U.S. presidential debate between President Donald Trump and Democratic nominee Joe Biden, with five weeks to go until the November 3 general election.
“The debates could carry its bag of uncertainties,” Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note, adding the debate could be key to direction of precious metals in the short-term.
· UBS says you should buy gold now
Investors should be putting their money in gold now, as it represents a “very good hedge” ahead of risk events such as the U.S. election, UBS Global Wealth Management told CNBC.
“We like gold, because we think that gold is likely to actually hit about $2,000 per ounce by the end of the year,” according to Kelvin Tay, the firm’s regional chief investment officer, on Tuesday.
“And gold has certain hedges to it,” Tay said. “In (the) event of uncertainty over the U.S. election and the Covid-19 pandemic, gold is a very, very good hedge. And its recent weakness represents a great entry point for investors,” he added, speaking to CNBC’s “Squawk Box.”
The precious metal is also attractive due to the low interest rate environment, Tay pointed out.
If interest rates stay low as the Fed has indicated, the opportunity cost of holding gold — a non-yielding asset — will be “quite low,” he added. That’s because investors are not forgoing interest that would be otherwise earned in yielding assets.
Tay also recommended that investors put some money into Chinese government bonds as they are set to be included in major index provider FTSE Russell’s World Government Bond Index. The inclusion, from October 2021, is set to bring billions of dollars of inflows into China.
Tay pointed out that Chinese government bond yields, at 2.5%, are higher than other regions, compared to U.S. yields at 0.6% and European yields at largely negative levels.
“This is really high returns for a very good quality government with very strong balance sheets,” he said.
· Elsewhere, silver dropped 1% to $23.49 per ounce, platinum eased 0.3% to $876.47, while palladium gained 0.4% to $2,263.97.
Reference: CNBC
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