Gold surrenders early gains as vaccine hopes spur risk appetiteGold surrenders early gains as vaccine hopes spur risk appetite
FILE PHOTO: Gold rings are seen on display at a goldsmith shop in Kuala Lumpur

By Harshith Aranya

(Reuters) – Gold gave up early gains on Tuesday to trade flat below a 7-1/2-year high hit in the last session, as risk appetite improved on promising early-stage data for a potential COVID-19 vaccine.

Spot gold was steady at $1,731.50 per ounce by 0650 GMT, after rising 0.5% earlier in the day on renewed Sino-U.S. trade tensions and global stimulus. U.S. gold futures fell 0.1% to $1,733.30.

Despite the news on a potential coronavirus vaccine lighting a fire under the equity markets, gold will remain very well bid due to the “ridiculously huge” Federal Reserve balance sheet, said Stephen Innes, chief market strategist at financial services firm AxiCorp.

On Monday, the metal hit its highest since October 2012 before retreating to close lower, as stocks and oil surged after drugmaker Moderna <MRNA.O> said its COVID-19 experimental vaccine showed promising results in an early-stage trial.

Asian shares jumped as the news boosted hopes for a swift reopening of the global economy.

“Gold investors still see the opportunity on both sides of the coin right now because optimism from lockdowns is also inflationary,” said Innes.

“But the trade war itself is a huge risk as we saw through 2019, that was the primary driver for gold prices to go up.”

Gold tends to benefit from widespread stimulus from central banks because it is widely viewed as a hedge against inflation and currency debasement.

The metal has risen about 14% this year as central banks rolled out a wave of interest rate cuts and other stimulus to limit the economic damage from the pandemic.

The International Monetary Fund’s head said the global economy would take much longer to recover fully from the shock caused by the pandemic than initially expected.

Raising fears of a further deterioration in Sino-U.S. relations, stock exchange Nasdaq Inc <NDAQ.O> is set to unveil new restrictions on initial public offerings, which will make it more difficult for some Chinese companies to debut on it, sources said.

“The upside (for gold) may be limited as (safe-) haven flows will probably pour into the U.S. dollar (in the event of escalating U.S.-China tensions), capping the appeal of the anti-fiat metal,” DailyFx currency strategist Ilya Spivak said.

“On the technical front, it looks like gold has broken out of a bullish symmetrical triangle pattern, which sets the stage for gains.”

Palladium rose 0.7% to $2,026.88 per ounce, having jumped more than 9% at one point on Monday.

Platinum fell 0.4% to $814.67, and silver declined 0.7% to $17.05.

(Reporting by Harshith Aranya and Swati Verma in Bengaluru; Editing by Subhranshu Sahu)