Gold slips from three-week high as dollar ticks up

(Reuters) - Gold slipped from a three-week peak on Monday as the dollar recovered some ground, but the prospect of more U.S. coronavirus relief spending and uncertainty surrounding next month’s presidential election put a floor under prices.

FILE PHOTO: Gold bars are pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020/File Photo

Spot gold was down 0.2% at $1,925.56 per ounce at 1213 GMT, after hitting its highest level since Sept. 21 at $1,932.96 earlier in the session.

U.S. gold futures edged up 0.2% to $1,931.50.

“We’ve seen a bit of a modest dollar rebound,” said Michael Hewson, chief market analyst at CMC Markets UK.

“I’m still very much of the opinion that we need to buy in the dip as, ultimately, the prospect of further stimulus post the U.S. election is helping support gold prices,” he added.

The dollar index rose 0.1%, crawling away from a three-week low touched in the previous session. A stronger dollar tends to weigh on gold by making it more expensive for holders of other currencies.

Gold, which has gained over 27% so far this year, tends to benefit from stimulus spending because it is considered a hedge against inflation risks and currency weakening. It is also in demand at times of heightened market uncertainty.

The Trump administration on Sunday called on Congress to pass a stripped-down coronavirus relief bill using leftover funds, as negotiations on a broader package stalled ahead of the Nov. 3 presidential election.

“We are in a wait-and-see scenario, as investors try to understand what is going to happen in early November with the U.S. election and the subsequent reaction of both stocks and currency markets,” ActivTrades chief analyst Carlo Alberto De Casa said in a note.

“Technically gold is regaining strength, with the consolidation above $1,920 a supportive signal for bullion and confirming traders’ huge interest.”

Elsewhere, silver gained 0.3% to $25.19 per ounce, palladium rose 0.3% to $2,445.89, while platinum eased 0.2% to $884.35.

Reporting by Brijesh Patel in Bengaluru; Editing by Jan Harvey and Pravin Char