Gold buoyed by Covid-19 Delta variant woes; focus on US inflation data

By Brijesh Patel

(Reuters) - Gold prices inched higher on Wednesday, as worries over a surge in cases of the Delta coronavirus variant overshadowed pressure from a stronger dollar and bond yields, with investors awaiting U.S. inflation data due later in the day.

Spot gold was up 0.1% at $1,730.31 per ounce by 0637 GMT, and U.S. gold futures rose 0.1% to $1,732.70.

"Lingering Delta virus concerns are offering some safe-haven inflows into gold in the Asian session, but gold is still struggling to recover from the flash crash on Monday," said Stephen Innes, managing partner at SPI Asset Management.

"Obviously, with the Federal Reserve communication taking a more hawkish turn, coupled with the strong U.S. non-farm payrolls data, markets are a little bit nervous about taking it (gold) higher."

Risk sentiment in wider financial markets remained subdued, as coronavirus cases in several Asian countries continued to surge, threatening the economic outlook and driving some investors towards safe-haven assets.

But the dollar index held firm near a three-week high against its rivals, while U.S. Treasury yields hit their highest levels since mid-July.

Investors now eye the monthly U.S. personal consumption report due at 1230 GMT that could influence the Fed's timeline to taper monetary support.

Chicago Fed President Charles Evans on Tuesday said that the current inflation spike shouldn't push the central bank to tighten monetary policy prematurely, with more months of labour data needed before any changes.

Indications in recent days of an improving labour market has raised fears of a sooner-than-expected U.S. interest rate hike, sending gold prices to a four-month low on Monday.

"Gold's inability to recapture the $1,750 level means that the technical picture remains heavily negative, and it is vulnerable to further sell-offs," Jeffrey Halley, a senior market analyst, Asia Pacific at OANDA said in a note.

Silver gained 0.1% at $23.34 per ounce. Platinum rose 0.7% to $1,001.82, and palladium climbed 0.2% to $2,645.82.

 

(Reporting by Brijesh Patel in Bengaluru; editing by Uttaresh.V and Amy Caren Daniel)