Spot Gold Turns Flat After Touching $2,000 Mark Amid Rising COVID-19 Cases

Spot gold turned flat after crossing the $2,000 per ounce mark on Tuesday, as weakness in the US dollar made the yellow metal cheaper for holders of other currencies. The December gold futures contract on Comex was last seen trading down $0.40 - or 0.02 per cent - at $1,978.20 per ounce, having earlier risen to as high as $2,001.20 per ounce, soon after opening marginally lower at $1,973.70 compared to its previous close of $1,978.60 per ounce. At the strongest level of the day, spot gold came within 4.5 per cent of an all-time high of $2,089.20 per ounce registered this month.

The dollar index - which gauges the greenback against six other currencies - declined as much as 0.43 per cent on Tuesday. Bets that interest rates in the world's largest economy would stay lower for longer under the US central bank's new policy framework hurt the dollar.

The Federal Reserve's new strategy, which could result in slightly higher inflation and interest rates staying lower for longer, has triggered a selloff in the US currency, driving inflows into safe-haven bullion. Low interest rates reduce the opportunity cost of holding non-yielding bullion.

Analysts say gold may continue to trade with a positive bias as bulls target the $2,000 per ounce level. 

"Gold remains supported by persisting weakness in the US dollar. The US dollar index trades near May 2018 lows weighed down by shift in Fed's inflation strategy which highlights that interest rate may remain low for a long time," said Ravindra Rao, VP-head commodity research at Kotak Securities.

"The dollar should be watched for as any recovery might put pressure on gold," he added.

Gold has been one of the most consistent gainers through the six months of coronavirus pandemic-led turmoil in financial markets, benefiting from a flood of capital into the world economy and investors seeking relatively safer options to direct their funds.