Picture: 123RF/PHAWAT KHOMMAI
Picture: 123RF/PHAWAT KHOMMAI

Bengaluru — Gold prices fell on Thursday as hopes for an economic recovery next year increased risk appetite, though the precious metal was set to wrap up the year with its best performance in a decade.

Spot gold fell 0.2% to $1,889.58 an ounce by 3.53am GMT, but was up more than 24% for the year.

US gold futures were little changed at $1,892.90. Asian shares were set to end the year at record highs as investors pinned hopes on a swift economic recovery next year, also putting pressure on the dollar.

“The dollar is going to weaken quite precipitously until Q1, giving gold a clear runaway to do well right out of the gates next year,” Stephen Innes, chief global market strategist at Axi, said, adding that inflation remained key to gold’s trajectory.

Boosting hopes for a faster economic recovery next year, Britain on Wednesday approved Oxford University and AstraZeneca’s vaccine to combat a fast-spreading coronavirus variant.

Also weighing on bullion was Republican Senate majority leader Mitch McConnell’s refusal for a quick vote on a bill to increase US relief cheques to $2,000, saying it had “no realistic path to quickly pass the Senate”.

Unprecedented stimulus measures and low-interest rates to cushion economies from the pandemic’s blow this year have benefited gold as it is seen as a hedge against inflation.

“Once inflation kicks in into Q2 and it actually goes very high, the Fed is going to start pulling back and this is when it’s going to get tricky for gold,” said Innes.

Silver fell 0.9% to $26.38 an ounce but was up more than 48% this year, its best performance since 2010.

Platinum dropped 0.5% to $1,060.18 an ounce but was up 10% in 2020. Palladium rose 0.3% to $2,368.68 an  ounce and was on track for a fifth straight year of gains with a 22% rise.

Reuters

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