Gold dips as fears over new virus strain lifts dollar

Gold bars at Solar Capital Gold Zrt. in Budapest, Hungary on March 10, 2016.
Akos Stiller | Bloomberg | Getty Images

Gold prices fell on Tuesday as the dollar benefited from safe-haven buying driven by fears over a new coronavirus variant in the United Kingdom.

Spot gold fell 0.7% to $1,862.55 per ounce, while U.S. gold futures settled down 0.7% at $1,870.30.

"Dollar strength has capped some of gold's upward momentum," Standard Chartered Analyst Suki Cooper said.

Making gold more expensive for holders of other currencies, the dollar gained as investors trimmed exposure to riskier currencies like that of the United Kingdom, which is facing a new variant of the coronavirus.

Meanwhile, data on Tuesday showed the U.S. economy grew at a record pace in the third quarter. Bullion hit a six-week high of $1,906.46 on Monday, mainly supported as U.S. Congress approved a $892 billion coronavirus aid package to support the pandemic-ravaged economy.

"Price risks are skewed to the upside for gold as we enter 2021, given our expectations for the dollar to weaken and monetary policy to remain accommodative, but year-end profit-taking may cap the gains in the near term." Cooper added.

Gold, considered a hedge against inflation, has still risen more than 23% this year amid the massive stimulus unleashed globally.

"If the new strain does make its way into the U.S. and does reinfect people, that could really cause some additional economic damage and that could be kind of the next tailwind for gold," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

In other metals, silver fell 3% to $25.41 an ounce, distancing itself from a more than three-month peak hit in the previous session.

Platinum was down 0.6% at $1,002.62 and palladium rose 0.3% to $2,315.32.