Gold rises to nine-year peak on tepid dollar, stimulus bets

London (July 21) - Gold scaled a nine-year peak on Tuesday propelled by a softer dollar and expectations of more stimulus measures to resuscitate pandemic-hit economies, while silver sprinted past $20 for the first time since September 2016.

Spot gold gained 0.4% $1,823.29 per ounce by 0958 GMT after hitting its highest since September 2011. U.S. gold futures rose 0.5% to $1,825.50.

"Gold is deriving strength from a broadly weaker dollar despite the improving market mood," said FXTM analyst Lukman Otunuga.

"The fundamental themes weighing on global sentiment remain intact with rising coronavirus cases in the largest economy in the world fostering a sense of unease."

The dollar fell to a more than four-month low versus major currencies.

Gold's advance defied a gain in world shares on the European Union's 750 billion euro ($857 billion) stimulus plan and hopes for coronavirus vaccines. Gold is finding support from discussions about new fiscal stimulus, said UBS analyst Giovanni Staunovo.

Gold tends to benefit from widespread stimulus as the metal is widely viewed as a hedge against rising prices and currency debasement. Analysts are, however, divided on the outlook for inflation. In the United States too, congressional Republicans announced plans to seek another $1 trillion in economic relief.

A surge in virus cases in the United States and globally have stoked doubts about economic recovery, helping gold gain about 20% so far this year. Silver jumped 2.5% to $20.39, having earlier hit a peak since August 2016 at $20.45.

"Silver is starting to outperform gold here. On the one hand, it's obviously appreciating on the basis of increased appeal for precious metals," IG Markets analyst Kyle Rodda said. "On top of that, there's likely to be an element of silver catching a bit on a rebound in global industrial activity."

Palladium rose 1.2% to $2,079.46 per ounce, while platinum gained 0.9% to $851.50.

Reuters