May 12, 2020 / 3:37 PM / 21 days ago

PRECIOUS-Gold gains as investors bet on more stimulus

 (Updates prices)
    * Fed to begin purchasing exchange-traded funds on Tuesday
    * Dollar slips from over two-week high
    * For an interactive graphic tracking the global coronavirus
spread, open tmsnrt.rs/3aIRuz7 in an external browser

    By Eileen Soreng
    May 12 (Reuters) - Gold rose on Tuesday on expectations of
more stimulus from the U.S. Federal Reserve to support an
economy battered by coronavirus-induced restrictions, while an
easing dollar lent further support. 
    Spot gold        rose 0.3% to $1,701.44 per ounce by 1:51
p.m. EDT (1751 GMT). U.S. gold futures         settled up 0.5%
at $1,706.80 per ounce.
    "The Fed is going to start buying bond exchange traded funds
(ETFs) for the first time ever. This is big... here's more
stimulus coming to the table and everybody knows when there's
more stimulus, you want to own more gold," said Michael
Matousek, head trader at U.S. Global Investors.
    The U.S. central bank will start purchasing shares of ETFs
that invest in bonds on Tuesday through its Secondary Market
Corporate Credit Facility.             
    The facility is one of several tools recently created by the
Fed to improve market functioning in the wake of the pandemic.
    "Gold over past month and a half has traded in a range," 
Matousek said, adding, "one of the positive things that can
boost gold to breakout would be more talk about more stimulus
across the globe."
    U.S. President Donald Trump on Tuesday again pushed the Fed
to adopt negative interest rates, even as several members of the
central bank have said they do not see a need for rates - now
near zero - to move into negative territory.             
    Gold has risen over 12% so far this year as global central
banks unleashed a wave of stimulus to limit economic damage.
            
    Gold tends to benefit from widespread stimulus measures
because it is considered a hedge against inflation and currency
debasement.
    The dollar index       , also considered a safe store of
value during uncertain times, fell 0.3% after earlier hitting an
over two-week high. 
    Growing fears of a second wave of infections also supported
gold as the Chinese city of Wuhan, where the pandemic
originated, reported new cases since its lockdown was lifted.
            
    Markets also kept a close eye on China-U.S. trade relations
after Trump said he was not interested in re-negotiating the
"Phase 1" deal.             
    "The spot price of gold is consolidating just above the
threshold of $1,700 in a scenario where investors remain bullish
on gold but require fresh stimuli to generate another rally,"
ActivTrades chief analyst Carlo Alberto De Casa said in a note.
    Elsewhere, palladium        fell 2.2% to $1,853.06 per
ounce, while platinum        gained 0.8% to $763.11.
    Silver        eased 0.3% at $15.50 per ounce. 

    
 (Reporting by Eileen Soreng in Bengaluru
Editing by Chris Reese and Marguerita Choy)
  
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