Gold regained some lost ground on Tuesday after a sharp fall in the previous session as concerns over global economic recovery and expectations of further fiscal and monetary stimulus offered support to the safe-haven metal.
Spot gold rose 0.7% to $1,875.70 an ounce. U.S. gold futures settled up 1.2% at $1,876.40.
"Gold is trying to find equilibrium this morning, 24 hours after the Pfizer earthquake rearranged the landscape. I expect gold will continue to grind back higher, but it's going to take a bit longer," said Tai Wong, head of base and precious metals derivatives trading at BMO. "The fundamental factors for gold remain quite friendly. Stimulus is on the cards and with a vaccine we will get reflation."
Gold lost 4.6% on Monday, its biggest daily fall since Aug. 11, after U.S. drugmaker Pfizer Inc said its COVID-19 vaccine was more than 90% effective based on initial trial results, lifting U.S. equities to record highs.
However, shares eased on Tuesday as worries about the extent of the COVID-19 pandemic's economic impact resurfaced.
"The fiscal and monetary response to the pandemic globally will remain highly accommodative. This will continue to provide gold and silver, as well as platinum, with reason to go higher," HSBC analysts said in a note. "But the psychological relief and shift in risk sentiment may still weigh on gold and the other metals, with the exception of palladium, in the immediate term."
Gold tends to benefit from stimulus spending because it is considered a hedge against inflation risks and currency weakness.
Meanwhile, Dallas Federal Reserve Bank President Robert Kaplan said he was "cautious and concerned" about downside economic risks in the short term because of the resurgence of the coronavirus.
Silver gained 0.9% to $24.28 an ounce, platinum climbed 1.8% to $881.61 and palladium eased 0.7% to $2,460.33.