Gold inches down as dollar strengthens on U.S. stimulus delay

Gold prices fell on Thursday as the dollar rose after hopes faded for an U.S. fiscal stimulus package before the presidential election, denting bullion’s appeal as a hedge against inflation.

Spot gold was down 0.1% at $1,899.46 per ounce. U.S. gold futures fell 0.2% to $1,903.40.

“A lot of concerns about the stimulus in the short term, and the strength in the dollar, is causing the gold market to sell off a little,” said Jeffrey Sica, president and chief investment officer of Sica Wealth Management.

The dollar rallied against rivals after U.S. Treasury Secretary Steve Mnuchin on Wednesday said that a deal on a relief package would be hard to reach before the Nov. 3 election.

Meanwhile, an unexpected rise in U.S. weekly jobless claims also did not help gold.

But “the jobless numbers showed that we’re not out of the woods yet, that we still have a lot of headwinds we’ve to contend with, which points to the likelihood of more government intervention through stimulus and suppressed interest rates.” Sica said.

Gold, considered a hedge against inflation, currency debasement and uncertainty, has gained 25% this year, driven by massive global stimulus to cushion economies from the pandemic-induced slump.

“While we don’t expect a deeper consolidation to take place, a close below $1,870/oz would catalyze a selling program which could potentially mark peak capitulation as even systematic trend followers would be set to liquidate some gold length,” TD Securities analysts said in a note.

“Ultimately the macro factors that have driven investors to seek the yellow metal’s warm embrace will keep investment capital flowing into gold well into next year.”

Among other metals, silver fell 1.2% to $23.99 per ounce, platinum slipped 0.4% to $853.64 and palladium climbed 0.1% to $2,345.72.

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