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Gold Dips Again as Dollar Surprisingly Becomes 'Haven of Choice'

Gold fell again Thursday, yields dove and stocks cratered on mixed views about the U.S. recovery from Covid-19. 

But the dollar alone rallied, and held to most of its gains after sliding later in the day. That earned it the “haven of choice” tag from some analysts despite Fed policy that hardly backs such endearment.

Gold for December delivery on New York’s Comex settled down $6.90, or 0.4%, at $1,937.80 per ounce. The benchmark U.S. gold futures contract lost $41 over the past two sessions from an unexpected surge in the dollar — despite a drop in bond yields even then.  

The spot price of gold, which reflects real-time trades in bullion, was down $6.52, or 0.3%, at $1,936.45 by 2:30 PM ET (18:30 GMT). 

Gold returned to the $2,000 territory on Tuesday for the first time in 10 days but was quickly beaten back by a rally in the dollar that few could explain. 

The Federal Reserve’s new Monetary Framework Policy revealed a week ago made clear that it could be years before the next hike for interest rates, now at between zero and 0.25%. The U.S. 10-Year Treasury note has broadly fallen since then, correctly reflecting the Fed’s increased commitment to monetary easing. 

Yet, the Dollar Index, which pits the greenback against six other major currencies led by the euro, recovered quickly from an initial tumble triggered by the new Fed framework. Since then, it also shed less than 0.5%. It has even reclaimed at some points its 93-handle, relatively seen as bullish in the current environment.

“The divergence between the trajectory of U.S. yields and equities versus the U.S. Dollar, energy and precious metals implies that the greenback is still the haven of choice,” said Jeffrey Halley, who heads research for the Sydney desk of New York-based online brokerage OANDA.

Thursday’s run-up on the dollar was fed by U.S. weekly jobless claims, which at 881,000 came in better than the 950,000 expected by analysts. Despite the relatively positive number, Wall Street had one of its biggest drops in recent months, with the Dow slumping 2.2%, S&P 500 3.3% and Nasdaq 4.6%.

But it was the dollar that became the “haven of choice” for investors fleeing from risk on Thursday — not gold, which has a legacy for such standing.

Markets now await U.S. jobs numbers for all of August due on Friday in the Labor Department’s  nonfarm-payrolls. Economists are expecting an addition of 1.4 million jobs for last month after July’s growth of 1.76 million. 

No one seems to know yet if the dollar will continue rallying if the job numbers come in lower.

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