Gold drops 1% on stronger dollar, hopes of economic recoveryGold drops 1% on stronger dollar, hopes of economic recovery
FILE PHOTO: A Saudi jeweller wearing a protective face mask arranges gold jewels at a jewellery store during the holy month of Ramadan, following the outbreak of the coronavirus disease (COVID-19), in Riyadh

By Brijesh Patel

(Reuters) – Gold slipped 1% on Thursday, drifting away from a 7-1/2 year peak, as the dollar strengthened and hopes of a quick economic recovery dented bullion’s safe-haven appeal.

Spot gold was down 1% at $1,732.43 per ounce at 0930 GMT. U.S. gold futures fell 1.1% to $1,733.60 per ounce.

The dollar index, comparing the greenback against a basket of rivals, rose 0.4%, making gold more expensive for holders of other currencies.

“Gold seems to have lost a little momentum since breaking above $1,750 and the rise in the dollar today doesn’t seem to be helping,” OANDA analyst Craig Erlam said.

“However, the enormous amount of monetary stimulus in the system, the need for that to continue for some time and the inflation risk are all bullish for gold in the longer term.”

Gold prices climbed to their highest since October 2012 at $1,764.55 earlier this week, mainly driven by recession fears, U.S.-China tensions and massive monetary and fiscal stimulus.

U.S. Federal Reserve policymakers acknowledged the possibility of further support measures if the economic downturn persists, the minutes from their latest policy meeting showed.

Focus now shifts to initial U.S. jobless claims data due later in the day for further clues about the health of the world’s top economy.

The devastating impact of the coronavirus pandemic on the euro zone economy abated a little this month as some governments eased lockdowns, a survey showed. “The yellow metal remains locked within a $40 range ($1,760 $1,720) and should continue to find solid interest toward the lower end over the near term,” MKS PAMP said in a note.

Among other precious metals, palladium dropped 3.3% to $2,032.02 an ounce, after hitting a one-month high on Wednesday. Platinum shed 1.7% to $836.03.

Silver dipped 1.7% to $17.21 an ounce.

(Reporting by Brijesh Patel in Bengaluru; Editing by Mark Potter)