Gold inches down as dollar recovers; focus turns to Georgia race

Gold eased on Tuesday after hitting an eight-week high, as the US dollar recovered ahead of Senate runoff elections in Georgia that will decide the future path of fiscal stimulus in the world's largest economy.

Spot gold dipped 0.1% to $1,939.56 per ounce by 0715 GMT, after hitting its highest since Nov. 9 at $1,945.26 earlier in the session, while US gold futures edged 0.2% down to $1,943.50.

"The dollar has strengthened overnight from an over two-year low, that is weighing on prices," said DailyFX strategist Margaret Yang. "Monday's rally largely priced in a Democratic win in the Senate election, so we're seeing some profit-taking as well."

Bullion jumped as much as 2.4% on Monday after the dollar slipped to its lowest since April 2018, but since then the US currency has recovered.

The dual runoff elections in Georgia will decide which party controls the US Senate. A Democratic victory in both races could tip control of the Senate away from Republicans.

England went into a new national lockdown to contain a surge in COVID-19 cases, while New York registered its first case of the more contagious strain of coronavirus found in the UK.

"In view of still accelerating coronavirus crisis in the US, the Fed will perhaps hint at further monetary support and extension of the extra low interest rate environment beyond 2023," Yang said. Minutes of the US Federal Reserve's last policy meeting are due on Wednesday.

Gold's trend remains bullish as inflation expectations are increasing, said Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai, adding that the Fed's dovish tone and a weaker dollar would push the metal towards $2,000-$2,050 this year.

Silver rose 0.3% to $27.28, platinum lost 0.5% to $1,064.88, and palladium gained 0.4% to $2,381.52.