Gold firms but taper bets outweigh impact of coronavirus surge

Gold edged higher on Wednesday as concerns over the rapid spread of the Delta coronavirus variant spurred some safe haven buying though gains were capped by bets on early tapering by the U.S. Federal Reserve and a firm dollar.

Spot gold was up 0.2% at $1,732.50 per ounce by 0919 GMT, recovering some ground after four straight sessions of declines. U.S. gold futures rose 0.1% to $1,733.60.

"Bullion bulls have been overruled by the heightened expectations for the Fed's eventual tapering, outweighing concerns surrounding the Delta variant's potential impact on the global economic recovery," said Han Tan, chief market analyst at Exinity.

Stronger-than-expected non-farm payrolls data last week coupled with comments from Fed officials suggesting an earlier-than expected tapering of economic support hammered precious metals over the past couple of sessions, keeping gold pinned well below the pivotal $1,800 level.

The dollar index on Wednesday held near a three-week high, reducing gold's allure among other currency holders, while U.S. Treasury yields hit their highest levels since mid-July. [USD/] [US/]

"The rebound in yields is also expected to run further as the tapering talk grows louder, which would only strengthen the headwinds besetting gold," Exinity's Han added.

Higher yields threaten non-interest bearing gold's appeal as an inflation hedge.

But Chicago Fed president Charles Evans said on Tuesday that the current inflation spike should not push the Fed to tighten monetary policy prematurely, with more months of labour data needed before any changes.

While there's a good sign of stabilisation in the gold market, there's little support from tensions surrounding the economic impact of new virus infections, Quantitative Commodity Research Analyst Peter Fertig said.

Focus is now on monthly U.S. personal consumption report at 1230 GMT for further cues on the tapering timeline.

Silver rose 0.1% to $23.34 per ounce, platinum gained 0.9% to $1,004.23, while palladium fell 0.2% to $2,636.85.

 

(Reporting by Arundhati Sarkar in Bengaluru. Editing by Jane Merriman)