Gold scales 8-week high as tighter lockdown measures loom

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Gold prices started the new year on a high by notching an eight-week peak after surpassing the key $1,900 level on Monday, as a surge in COVID-19 cases and prospects of tougher coronavirus control measures lured investors to the safe-haven metal.

Spot gold rose 1.1% to $1,919.07 per ounce by 0246 GMT, having hit its highest since Nov. 9 at $1,920.09, while U.S. gold futures climbed 1.5% to $1,923.50.

A business survey on Monday showed that activity growth in China’s vast industrial sector had slowed, raising doubts about swift global economic rebound. Investors also looked forward to data from the United States and Europe that is due later in the day.

“Some potentially challenging macro data adds support for gold. The December PMIs could show elemental weakness, given the fact that COVID-19 is still ravaging livelihoods in the United States and Europe,” said Dominic Schnider, head of commodities and APAC forex at UBS Wealth Management in Hong Kong.

The dollar remained weaker against rivals, making gold cheaper for other currency holders, while Nikkei was off the 30-year high milestone as possible tightening in coronavirus emergency rules for Tokyo weighed on sentiment. British Prime Minister Boris Johnson hinted at tougher lockdown restrictions, further lifting bullion’s allure.

“A return to normal, thanks to the vaccines, at the earliest is in the second half of the year. That means monetary policy needs to be loose and that kind of environment can still entice people to hold gold as an insurance asset in the portfolio,” Schnider said.

Markets now await U.S. Federal Reserve’s minutes of the latest meeting on Wednesday for clues on policy outlook.

Investor focus was also on Tuesday’s Georgia runoff elections that will decide the control of the U.S. Senate, and the likely fate of President-elect Joe Biden’s legislative agenda.

Silver gained 2.6% to $27.03 an ounce.

Platinum rose 1.6% to $1,085.22 and palladium climbed 0.6% at $2,462.70.

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