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Gold prices firmed on Tuesday as concerns over the economic damage from surging cases of the Delta coronavirus variant, and a dip in U.S. Treasury yields, lifted the metal from a one week low hit in the last session.

· Spot gold was up 0.1% to $1,813.82 per ounce at 0902 GMT, having hit a low of $1,794.06 in the previous session.

· U.S. gold futures gained 0.2% to $1,813.50.

· “The great problem currently is the fear about the economic impacts of the Delta variant of the coronavirus. And after Japan took severe measures concerning the Olympic Games, markets got more and more nervous ... (resulting) in a flight into the safe havens,” said Quantitative Commodity Research analyst Peter Fertig.

· A surge in coronavirus cases across the United States and other countries has dampened investor sentiment, sending riskier assets tumbling.

· Meanwhile, Tokyo Olympics organisers on Sunday reported the first COVID-19 cases among competitors residing in the athletes’ village.

· Gold, seen as a safe store of value, tends to benefit during times of political and financial uncertainty.

· Benchmark 10-year Treasury yields hovered near five-month lows, reducing the opportunity cost of holding non-interest bearing gold.

A firm U.S. dollar challenged gold’s appeal, as the currency held firm near 3-1/2-month highs. A stronger dollar makes gold more expensive for other currency holders.

· “Rapidly rising cases in Europe as well as in the United States prompted market participants to reduce risks in their portfolios,” said Julius Baer analyst Carsten Menke.

“If the U.S. dollar is strengthening because the yields are falling due to flight into the safe haven then the impact (on gold) ... could be only slightly positive or even negative, as we have seen,” Fertig added.

Hedge funds continue to invest in gold and reduce their bearish bets, according to the latest data from the Commodity Futures Commission; however, some analysts warn investors that sentiment could be shifting as the precious metal sees little new momentum despite a sustained drop in bond yields.

The CFTC disaggregated Commitments of Traders report for the week ending July 13 showed money managers increase their speculative gross long positions in Comex gold futures by 4,720 contracts to 135,938. At the same time, short positions fell by 3,611 contracts to 49,647.

The gold market's net length now stands at 86,291 contracts, up 10.6% from the previous week.

Analysts at Commerzbank also noted that speculative interest could start to shift as gold prices struggle. They said that selling in gold-backed exchange-traded products could foreshadow further selling among speculators in futures.

· Brazil's central bank buys 41.8 tonnes of gold in June

Gold is back in demand among central banks. The Brazilian central bank increased its precious metals holdings by more than 52% in June.

According to a report from the Rio Times, the Banco Central do Brasil bought 41.8 tonnes of gold last month. Its gold reserves as of the end of the month are valued at $6.873 billion. According to reports, this is the central bank's biggest gold purchase since at least December 2000.

It has been a busy spring for Brazil's central bank. It bought 11.9 tonnes of gold in May, which marked its first increase in its reserves since November 2012.

According to the latest data from the central bank, total international reserves were valued at $352.5 billion. The bank's gold holding represents 1.9% of total reserves, up from 1.2%.

· Brazil 2021 inflation, interest rate forecasts climb to new peaks -survey

The outlook for 2021 Brazilian inflation and interest rates rose to new highs, a survey of economists showed on Monday, indicating a growing consensus that the central bank will quicken the pace of policy tightening in the coming months.

The median forecast for 2021 inflation from more than 100 economists in the central bank"s weekly FOCUS survey rose to 6.3% from 6.1%, significantly above the bank"s year-end goal of 3.75% and more than a percentage point above the 5.25% upper limit of its wider range.

It marked the 15th consecutive weekly rise in inflation forecasts for this year.

· Mexico's annual inflation likely slowed in first half of July: Reuters poll

Mexico’s annual inflation likely slowed in the first half of July, while remaining well above the central bank’s official target, a Reuters poll showed on Monday.

The median forecast of 16 analysts showed inflation ticked down to 5.65% for the first two weeks of July, compared with 5.74% in the second half of June.

The Bank of Mexico, or Banxico, targets an inflation rate of 3% with a tolerance threshold of one percentage point above and below that level.