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GLOBAL MARKETS-As good as gold? Precious metal shines again

Wed, 5th Aug 2020 10:09

* Gold surges past key technical barrier of $2,000 an ounce

* Falling U.S. dollar, bond yields push gold higher

* European shares, U.S. stock futures higher

* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Dhara Ranasinghe

LONDON, Aug 5 (Reuters) - Gold jumped to a record high on
Wednesday, pushing further past the $2,000 mark in the face of a
weak dollar, falling U.S. Treasury yields and expectations of
more stimulus measures for the pandemic-ravaged global economy.

European stocks opened higher, aided by a batch of
positive earnings. U.S. equity futures rose too,
indicating a firm open for Wall Street, while MSCI's broadest
index of Asia Pacific shares outside of Japan
rose 0.7% to a 6-1/2 month peak.

But it was the relentless rally in gold that held the
spotlight as prices hit a fresh record high at around $2,039 per
ounce.

The precious metal, which has soared more than 30% this
year, is benefiting from heightened uncertainty around the
long-term effects of the global health crisis.

Weakness in the dollar and falling U.S. Treasury yields have
encouraged investors to look for alternative store of value -
boosting the appeal of gold.

"What we're seeing at the moment with the dollar, bond
yields and gold are macro trades of concern - not just about the
coronavirus but also about the fiscal cliff in the U.S.," said
Seema Shah, chief strategist at Principal Global Investors in
London.

"There are real concerns that without a (U.S. stimulus)
deal, we will be looking at a very tough fourth quarter for the
U.S. economy and therefore the global economy."

White House negotiators on Tuesday vowed to work "around the
clock" with congressional Democrats to try to reach a deal on
coronavirus relief by the end of this week, as the pandemic
takes a heavy toll on American life.

The global death toll from the coronavirus surpassed 700,000
on Wednesday, according to a Reuters tally, with the United
States, Brazil, India and Mexico leading the rise in fatalities.

MORE STIMULUS EXPECTED

This backdrop has boosted expectations for more stimulus,
with the president of the Federal Reserve Bank of San Francisco
saying on Tuesday that the U.S. economy will need more support
than initially thought.

The five-year Treasury yield hit a record low on Tuesday and
the benchmark 10-year Treasury yield fell to a five-month low at
around 0.51%, holding near those levels on
Wednesday.

In Asia, Japan's Nikkei dipped 0.26% and Australia's
benchmark index slipped 0.6%, notable underperformers in
otherwise generally upbeat Asian stock markets. South Korea's
Kospi hit its highest level since October 2018.

"Significantly increased odds" of more monetary policy
stimulus from the U.S. Federal Reserve is a key driver of
equities although the rally has been reined in by stretched
valuations, Mizuho analysts wrote in a note.

The dollar remained under pressure.

A hardening perception that the U.S. economic recovery is
lagging Europe has buttressed the euro, pushing it above $1.19
in the last couple of days.

The common currency last traded up 0.1% at $1.1815
. Most other major currencies were also up against the
dollar, pushing its index towards last week's two-year low of
92.53.

"The ongoing fall in U.S. real yields is helping to lift the
price of gold and weakening the U.S. dollar," said Lee Hardman,
currency analyst at MUFG, adding that the bank had lowered its
forecasts for the dollar on the assumption that the Federal
Reserve will loosen policy further this year.

In commodities, oil prices rose with Brent crude up
0.9% at $44.43 a barrel. U.S. crude also added 0.9% to
$42.06.

(Reporting by Dhara Ranasinghe; Additional reporting by Swati
Pandey in SYDNEY and Olga Cotega in LONDON;
Editing by Andrew Cawthorne)

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