May 19, 2020 / 7:32 AM / 13 days ago

PRECIOUS-Gold surrenders early gains as vaccine hopes spur risk appetite

 (Recasts, adds comments, updates prices)
    * World economy to take longer than expected to recover -IMF
head
    * On technical front, gold set for gains - analyst
    * For an interactive graphic tracking the global coronavirus
spread, open tmsnrt.rs/3aIRuz7 in an external browser

    By Harshith Aranya
    May 19 (Reuters) - Gold gave up early gains on Tuesday to
trade flat below a 7-1/2-year high hit in the last session, as
risk appetite improved on  promising early-stage data for a
potential COVID-19 vaccine.
    Spot gold        was steady at $1,731.50 per ounce by 0650
GMT, after rising 0.5% earlier in the day on renewed Sino-U.S.
trade tensions and global stimulus. U.S. gold futures        
fell 0.1% to $1,733.30.
    Despite the news on a potential coronavirus vaccine lighting
a fire under the equity markets, gold will remain very well bid
due to the "ridiculously huge" Federal Reserve balance sheet,
said Stephen Innes, chief market strategist at financial
services firm AxiCorp.
    On Monday, the metal hit its highest since October 2012
before retreating to close lower, as stocks and oil surged after
drugmaker Moderna          said its COVID-19 experimental
vaccine showed promising results in an early-stage trial.
                         
    Asian shares jumped as the news boosted hopes for a swift
reopening of the global economy.                         
    "Gold investors still see the opportunity on both sides of
the coin right now because optimism from lockdowns is also
inflationary," said Innes.  
    "But the trade war itself is a huge risk as we saw through
2019, that was the primary driver for gold prices to go up."
    Gold tends to benefit from widespread stimulus from central
banks because it is widely viewed as a hedge against inflation
and currency debasement.
    The metal has risen about 14% this year as central banks
rolled out a wave of interest rate cuts and other stimulus to
limit the economic damage from the pandemic.             
    The International Monetary Fund's head said the global
economy would take much longer to recover fully from the shock
caused by the pandemic than initially expected.             
    Raising fears of a further deterioration in Sino-U.S.
relations, stock exchange Nasdaq Inc          is set to unveil
new restrictions on initial public offerings, which will make it
more difficult for some Chinese companies to debut on it,
sources said.             
    "The upside (for gold) may be limited as (safe-) haven flows
will probably pour into the U.S. dollar (in the event of
escalating U.S.-China tensions), capping the appeal of the
anti-fiat metal," DailyFx currency strategist Ilya Spivak said.
    "On the technical front, it looks like gold has broken out
of a bullish symmetrical triangle pattern, which sets the stage
for gains."
    Palladium        rose 0.7% to $2,026.88 per ounce, having
jumped more than 9% at one point on Monday.
    Platinum        fell 0.4% to $814.67, and silver       
declined 0.7% to $17.05.

 (Reporting by Harshith Aranya and Swati Verma in Bengaluru;
Editing by Subhranshu Sahu)
  
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