Gold surrenders early gains as vaccine hopes spur risk appetite

Bengaluru - Spot gold was steady at $1,731.50 per ounce.

Gold gave up early gains on Tuesday to trade flat below a 7-1/2-year high hit in the last session, as risk appetite improved on promising early-stage data for a potential Covid-19 vaccine.
Spot gold was steady at $1,731.50 per ounce by 0650 GMT, after rising 0.5 per cent earlier in the day on renewed Sino-US trade tensions and global stimulus. US gold futures fell 0.1 per cent to $1,733.30.
Despite the news on a potential coronavirus vaccine lighting a fire under the equity markets, gold will remain very well bid due to the "ridiculously huge" Federal Reserve balance sheet, said Stephen Innes, chief market strategist at financial services firm AxiCorp.
On Monday, the metal hit its highest since October 2012 before retreating to close lower, as stocks and oil surged after drugmaker Moderna said its Covid-19 experimental vaccine showed promising results in an early-stage trial.
Asian shares jumped as the news boosted hopes for a swift reopening of the global economy.
"Gold investors still see the opportunity on both sides of the coin right now because optimism from lockdowns is also inflationary," said Innes.
"But the trade war itself is a huge risk as we saw through 2019, that was the primary driver for gold prices to go up."
Gold tends to benefit from widespread stimulus from central banks because it is widely viewed as a hedge against inflation and currency debasement.
The metal has risen about 14 per cent this year as central banks rolled out a wave of interest rate cuts and other stimulus to limit the economic damage from the pandemic.
Palladium rose 0.7 per cent to $2,026.88 per ounce, having jumped more than 9 per cent at one point on Monday. Platinum fell 0.4 per cent to $814.67, and silver declined 0.7per cent to $17.05. - Reuters