Gold prices edged higher to hit a more than one-month peak on Monday, on concerns about the global economic damage from the coronavirus outbreak and support measures from central banks worldwide.
Spot gold was up 0.3% at $1,694.50 per ounce by 10:47 am EDT (1447 GMT), having earlier hit its highest since March 9 at $1,697.75. US gold futures fell 0.6% to $1,742.90.
"There was a bit of profit taking early on, but prices should remain firm. Central banks are doing everything in their power to support the stock market and economy, which will eventually lead to inflation," said Phil Streible, chief market strategist at Blue Line Futures in Chicago.
"Yields on debt instruments are virtually zero, which increases physical demand for gold and silver as a safe-haven asset."
Inflation is regarded as gold-positive, because bullion is seen as a safe store of value when price pressures are rising.
The US Federal Reserve on Thursday announced a broad, $2.3 trillion stimulus package to help weather the outbreak. The crisis has forced 16.8 million Americans to file for unemployment benefits since the week ended March 21.
European Union finance ministers agreed on Thursday on half-a-trillion euros worth of support for their coronavirus-battered economies but left open the question of how to finance recovery in the bloc, which is headed for a steep recession.
The pandemic has infected more than 1.8 million people worldwide and killed 113,849, forcing countries to extend lockdowns and central banks to announce support measures to mitigate the financial toll.
US stock indexes fell at the open with investors bracing for an expected slide in quarterly earnings and signs of the long-term damage of the outbreak on Corporate America.
"COVID-19's deflationary effect has been a headwind for gold. But this trend should reverse in 2H20 as policy responses by governments and central banks gather traction," UBS analysts said in a note.
"Led by Fed easing, we now expect real US interest rates to dip deeper into negative territory and perhaps even test the post-GFC (global financial crisis) lows," UBS said.
Lower interest rates also reduce the opportunity cost of holding non-yielding bullion.
Indicative of sentiment, holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.6% to 994.19 tonnes on Thursday.
Elsewhere, palladium rose 0.9% to $2,192.28 per ounce, while platinum dipped 1.2% to $739.30 and silver fell 0.8% to $15.20.
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