Gold shines on falling dollar yields; pandemic cost issues weigh on equities

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SYDNEY (Reuters) – Gold hit a new high on Wednesday as a weaker dollar and falling bond yields honed in on its safe-haven appeal, while stocks were mostly weaker as investors backed down from the skyrocketing cost of the coronavirus pandemic.

FILE PHOTO: Gold bars are stacked in the vault room of the Pro Aurum gold house in Munich, Germany August 14, 2019. REUTERS / Michael Dalder / File Photo

Risk assets like stocks have surged in recent months thanks to massive stimulus from central banks and governments, but gold has also rebounded, a sign of heightened uncertainty over the long-term effects of the health crisis global.

Spot gold XAU = jumped to a record high of $ 2,030.72 an ounce on Wednesday as bond yields hit new lows. Prices have climbed about 33% this year. [GOL/]

Investors are counting on even more spending in the United States, with White House negotiators pledging to work “around the clock” to reach a deal by the end of the week.

Markets also hung on to comments from the President of the Federal Reserve Bank of San Francisco that the US economy needs more support than initially thought, causing long-term Treasury yields to spiral downward. .

“Failure to agree to another round of stimulus would hit the US economy hard at a time when high-frequency data suggests it is losing momentum,” said Tapas Strickland, analyst at National Australia Bank. , based in Melbourne.

The United States has reported more than 4.7 million coronavirus cases and more than 157,000 deaths, the highest in the world.

On Wednesday, the largest MSCI Asia-Pacific stock index outside of Japan .MIAPJ0000PUS was flat near a 6-1 / 2-month peak at 560.36 points.

Japan’s Nikkei lost 0.86% while Australia’s benchmark lost 1%. Chinese stocks also fell with the blue-chip CSI300 .CSI300 index down 0.8%, though not too far from a recent five-year high.

South Korea’s Kospi .KSII resisted the trend to reach its highest level since October 2018.

E-Mini futures for the S&P 500 ESc1 fell 0.1%.

On Wall Street, the Dow .DJI ended up 0.6%, the S&P 500 .SPX 0.4% and the Nasdaq Composite .IXIC 0.4%. [.N]

“Significantly increased probabilities” of a further monetary policy stimulus from the US Federal Reserve are a key driver for stocks although the rally was held back by stretched valuations, Mizuho analysts wrote in a report. note.

More central bank support also lowers yields on US Treasuries, driven by the long end of the curve, and helps “make gold shine,” they added.

GREENBACK UNDER PRESSURE

The dollar was under pressure USD = with the safe haven of the Japanese yen JPY = rising to 105.66 as the bond market’s weak view of the US recovery pushed real yields further into negative territory and nominal yields close to lows records. [US/]

The risk-sensitive Australian dollar AUD = D3 has risen more than 2% so far this year while the euro EUR = has climbed more than 5% against the greenback.

The Aussie was last up 0.3% to $ 0.7184 as the common currency neared a two-year high of $ 1.1812, underpinned by the hardening perception that the American rebound is lagging behind Europe. [FRX]

FILE PHOTO: A security guard wearing a face mask walks past the Bund Financial Bull statue, following an outbreak of the novel coronavirus disease (COVID-19), on the Bund in Shanghai, China, on March 18th, 2020. REUTERS / Aly Song / File Photo

Investors are now awaiting a video conference on Aug. 15 in which senior U.S. and Chinese officials are expected to review a trade deal and possibly voice their mutual grievances, sources say.

The US envoy to China said on Tuesday that Beijing did not want tensions escalating.

In commodities, oil prices were somewhat weaker with Brent LCOc1 8 cents at $ 44.35 a barrel. U.S. CLc1 crude fell 11 cents to $ 41.59. [O/R]

Additional reporting by Chris Prentice in Washington; Editing by Stephen Coates and Himani Sarkar

Our standards:Thomson Reuters Trust Principles.

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