Gold Trades Cautious as Dollar Strengthens, But Supported by Risk-off Sentiment
Gold is trading slightly under pressure early on Thursday as the US dollar strengthens, after having gained nearly 2% during the previous session over escalating fears of a global economic recession. At the time of writing, GOLD is trading at a little above $1,709.
Rising expectations for additional stimulus measures by governments and central banks in the wake of the extended lockdowns across the world continue to support the safe haven appeal of gold. However, the slight weakness in Thursday has been driven by gains in the dollar, which shares a negative correlation with the yellow metal.
Gold prices are expected to remain strong in the near future as more countries extend lockdown measures to contain the spread of the virus, causing more harm to their economies in the process. While the US government could soon announce an additional $500 billion worth of financial aid for local governments and hospitals, the EU is also expected to announce new measures to offset the financial damage of the pandemic soon.
Gold has also benefited from the prevailing risk-off sentiment in global markets after the sudden crash in US oil prices earlier this week. For now, fears of the extent of economic damage by the coronavirus pandemic continue to dictate moves in financial markets worldwide, even as economic data releases also disappoint traders and add to recession fears.
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