Gold bounces back above $1,900 as UK data renews recession fears - GulfToday

Gold bounces back above $1,900 as UK data renews recession fears

Gold bars

Picture used for illustrative purpose. File

Gold bounced back above $1,900 per ounce on Wednesday, as weak UK data renewed fears over a coronavirus-driven economic slump and helped bullion erase initial losses fuelled by a resurgent dollar.

Spot gold jumped 1.6% to $1,942.45 per ounce by 0816 GMT, rebounding from a 2.5% drop in early Asian trade. U.S. gold futures rose 0.2% to $1,949.40.

Silver also joined the rally, adding 5.6% to $26.17. Underscoring the economic damage caused by the pandemic, data showed Britain's economy shrank by a record 20.4% between April and June, the biggest contraction reported by any major economy so far.

"Finally, they've officially announced that they're into a recession for the first time since the financial crisis. This has supported the sharp rebound in gold and silver," said Jigar Trivedi, commodities analyst at Mumbai broker Anand Rathi Shares. 


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But European equities largely shrugged off the UK data since it was mostly in line with expectations.

A resurgent dollar, however, weighed on gold, with investors keeping a close eye on a stalemate in US stimulus talks and tensed US-China relations.

"The froth has been blown off the top of the gold market, and now fundamental price discovery is going on," said IG Markets analyst Kyle Rodda.

"There's no sign that gold's bottomed yet." Despite suffering the biggest one-day drop in more than seven years on Tuesday, gold's gains for the year stood at about 28%, as investors buy it as a hedge amid fears of currency debasement, with central banks flooding the global economy with money to ease the pandemic blow.

With policies likely to remain "loose for the foreseeable future," gold could move back towards $2,000, said ING analyst Warren Patterson. Platinum gained 2.5% to $953.50 and palladium rose 3.5% to $2,164.66. 


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