By K. Sathya Narayanan
(Reuters) – Gold prices inched lower on Wednesday as a stronger dollar and dash for cash following a historic rout in U.S. crude oil futures curbed demand for the safe-haven asset.
Spot gold eased 0.2% to $1,683.08 per ounce by 0347 GMT, after touching a near two-week low on Tuesday as the oil rout triggered a panic sell-off in wider markets, fuelling a rush for liquidity.
U.S. gold futures rose 1% to $1,704.60.
“There is a tussle between safe-haven buying and the need for cash,” said Cameron Alexander, an analyst with Refinitiv-owned metals consultancy GFMS, adding that a stronger dollar also weighed on bullion.
Traders will move from riskier assets to safe havens if stocks drop, he said, adding that investors were also hoarding cash to protect themselves from another sell-off in equities.
Against key rivals, the dollar hovered near a two-week high scaled on Tuesday.
Asian share markets dropped to two-week lows as the floor fell out from under crude prices, exposing the deep economic damage from the pandemic.
After falling into negative territory for the first time in history, U.S. crude futures recovered slightly, but the market continues to be plagued by a mounting supply glut and a virus-led demand collapse.
Gold may come under pressure in the longer term as it is used as a hedge against inflation and falling crude prices tend to rise deflationary pressures in the market, analysts said.
However, massive monetary and fiscal stimulus measures by global central banks, especially the U.S. Federal Reserve, and governments will keep gold supported, analysts said.
Gold tends to benefit from widespread stimulus measures from central banks, as it is often seen as a hedge against inflation and currency debasement.
The U.S. Senate on Tuesday unanimously approved $484 billion in fresh relief for the world’s largest economy.
Reflecting investors’ appetite for gold, holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.4% to 1,033.39 tonnes on Tuesday.
Among other precious metals, palladium rose 2.1% to $1,964.16 per ounce, having touched a near one-month low in the previous session.
Platinum gained 0.5% to $750.29 per ounce, while silver fell 0.9% to $14.79.
(Reporting by K. Sathya Narayanan in Bengaluru; Editing by Subhranshu Sahu)