May 11, 2020 / 3:44 PM / 16 days ago

PRECIOUS-Gold dips as investors opt for dollar on 'second wave' fears

 (Updates prices)
    * Germany reports jump in new cases
    * Specs cut bullish positions in gold in week to May 5 -CFTC

    By Eileen Soreng
    May 11 (Reuters) - Gold prices retreated on Monday as the
dollar benefited from safe-haven buying driven by fears over a
second wave of coronavirus infections.
    Spot gold        was down 0.3% at $1,695.75 per ounce by 
1:43 a.m EDT (1743 GMT). U.S. gold futures         settled 0.9%
lower at $1,698 per ounce.
    "We're seeing short-term demand for the dollar that's very
strong," said Daniel Ghali, commodity strategist at TD
Securities. He added gold is also caught between prospects of
massive monetary inflation, which should support prices, and
deflationary pressure from weak economic data.
    "But in the longer term, this macro environment should
actually lead to a lower dollar and that's part of the positive
gold story," Ghali added.
    Dampening demand for gold, the dollar rose on warnings of a
second wave of COVID-19 infections as global lockdowns ease. The
currency is considered a safe store of value rivalling gold in
times of economic and political uncertainty.       
    Germany reported that new infections were accelerating after
initial steps to ease its lockdown, triggering a global alarm
even as businesses opened from Paris to Shanghai. South Korea
also saw infections rebound.                          
    However, market participants said gold's trajectory would be
positive in the longer term as the metal tends to benefit from
widespread stimulus measures from central banks because it is
widely viewed as a hedge against inflation and currency
    A string of poor U.S. economic readings last week
underscored the impact of the virus and lifted expectations of
further stimulus measures from the Federal Reserve.
    "Gold prices could climb noticeably if speculative investors
were to jump on the bandwagon – and there is certainly good
reason for them to do so," Commerzbank analysts said in a note.
    "They just need to look at the extremely expansionary
measures taken by central banks and governments, which will lead
to a massive increase in balance sheets and national debt
    Speculators reduced their bullish positions in COMEX gold
contracts in the week to May 5, the U.S. Commodity Futures
Trading Commission (CFTC) said on Friday.                     
    On the physical front, gold demand improved in top hub China
this week as buyers took advantage of hefty discounts, while
activity remained muted in other hubs due to lockdowns and
    Among other precious metals, palladium        fell 0.8% to
$1,867.67 per ounce, while platinum        was down 0.2% at
    Silver        was 0.2% lower at $15.43.

 (Reporting by Eileen Soreng and Arpan Varghese in Bengaluru;
Editing by Richard Chang and Steve Orlofsky)
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