Gold firms on Fed stimulus measures, weaker dollar

Gold rose on Tuesday supported by a weaker dollar as well as the U.S. Federal Reserve's announcement of details of a plan to start buying corporate debt to revive the country's economy.

Spot gold rose 0.3pc to $1,729.05 per ounce by 0924 GMT, after falling more than 1pc before the Fed announcement on Monday. U.S. gold futures gained 0.6pc to $1,737.

"The massive increase in liquidity by not only the Fed but other central banks pumping much money into the market is helping gold," said Commerzbank analyst Daniel Briesemann.

"We see gold rise towards $1,800 in the second half of the year driven by the massive increase in liquidity by the central banks which should lead to currency devaluation."

The U.S. central bank said it would start purchasing corporate bonds in the secondary market corporate credit facility, boosting interest in riskier assets that sent global stocks higher and weighed on the U.S. dollar.

Fed Chairman Jerome Powell is due to testify before the Senate Banking Committee later in the day.

The Bank of Japan said it expected to pump around 110 trillion yen ($1 trillion) into the economy via its market operations and lending facilities.

Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.

Global cases of the novel coronavirus reached more than 8 million on Monday, as infections surged in Latin America and the United States while China is grappling with new outbreaks.

"Increasing infections imply economic weakness, need for continued further economic (fiscal and monetary support), which are all supportive of gold," said National Australia Bank economist John Sharma.

Palladium climbed 2.6pc to $1,956.62 per ounce, having earlier hit its highest since June 10 at $1,965.21.

Platinum rose 0.7pc to $817.30, having dipped to a one-month low on Monday.

Silver eased 0.2pc to $17.40.