Gold Dips As Equities Rally On Economic Recovery Hopes

Gold prices extended losses on Wednesday as equities jumped to three-month highs on optimism over global economic recovery, though losses were limited by a weaker U.S. dollar and civil unrest in the Unied States.

Spot gold fell 0.5% to $1,718.26 an ounce by 0920 GMT after dropping about 0.7% on Tuesday. U.S. gold futures fell 0.7% to $1,722.70.

"Generally markets are getting comfortable with the fact that even though the data is bad, things are likely to improve and that is taking the shine off gold," said Michael Hewson, Chief Market Analyst at CMC Markets UK.

Global shares hit three-month highs, driven by easing lockdowns and hopes for further monetary stimulus, despite rising COVID-19 tolls and continuing protests in U.S. cities over the death of a black man in police custody. [MKTS/GLOB]

"Nevertheless, the weak economic backdrop continues to provide some support, with investors continuing to pile into gold-backed ETFs," ANZ analysts wrote in a note.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.1% to 1,129.28 tonnes on Tuesday, their highest since April 2013.

Gold, widely viewed as a safe-haven investment, tends to gain during times of political and economic uncertainty.

Despite the fall in bullion prices, gold is expected to remain supported on the back of the weaker dollar, protests on the streets of the United States, souring U.S.-China relations and inflation worries because of widespread stimulus, Hewson added.

The dollar index fell to a more than two-month low and the protests in U.S. cities have continued despite curfews and vows by President Donald Trump to call on the National Guard or even the U.S. military.

In other metals, palladium gained 0.1% to $1,951.70 an ounce while platinum declined 0.6% to $833.93.

Silver fell 1.2% to $17.86, having hit its highest since Feb. 25 on Monday.

(Reuters)