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Money News

Gold steadies as stronger dollar counters safe-haven demand

(Reuters) - Gold steadied in a tight range on Monday, paring initial gains after a firmer dollar offset support from renewed fears over the economic hit from the COVID-19 pandemic.

FILE PHOTO: A salesman displays gold necklaces and earrings inside a jewellery showroom on the occasion of Akshaya Tritiya, a major gold buying festival, in Mumbai, India, May 7, 2019. REUTERS/Francis Mascarenhas

Spot gold was steady at $1,931.91 per ounce by 0742 GMT, after hitting a one-week low of $1,916.24 on Friday. U.S. markets are shut for the Labor Day holiday on Monday.

U.S. gold futures rose 0.1% to $1,936.20.

The dollar index .DXY rose 0.2% against its rivals, making gold expensive for holders of other currencies.

The dollar’s trend is the “big wall of risk” to gold right now, said Stephen Innes, chief market strategist at AxiCorp.

“The general theme from last week’s U.S. jobs report showed that the recovery is continuing to slow... The lower for longer interest rates narrative continues to chime well for the gold bulls.”

Federal Reserve Chairman Jerome Powell said on Friday the U.S. jobs report for August was “a good one,” but noted that with gains likely to slow, the Fed is planning to keep its foot on the monetary policy gas pedal for years.

Global central banks have rolled out massive stimulus and slashed interest rates to near zero to counter the economic damage from the coronavirus, helping gold climb over 28% this year. Focus will now be on the European Central Bank’s policy decision on Thursday.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

However, low physical demand remained a headwind for gold as coronavirus cases in the world’s second biggest bullion consumer India surpassed Brazil to take the second place after the United States.

Spot gold may bounce to $1,949, as it has cleared a resistance at $1,936 per ounce, said Reuters technical analyst Wang Tao.

Elsewhere, silver was steady at $26.87 per ounce, platinum rose 0.8% to $901.89 and palladium climbed 0.5% to $2,308.32.

Reporting by Brijesh Patel in Bengaluru; Editing by Amy Caren Daniel

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