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GLOBAL MARKETS-As good as...? Gold shines again as dollar weakens

Wed, 5th Aug 2020 12:22

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

* Weak dollar, falling bond yields boost gold

* 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
(Updates throughout, adds chart)

By Dhara Ranasinghe

LONDON, Aug 5 (Reuters) - Gold jumped to a record high on
Wednesday, pushing further past $2,000 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 rallied thanks to a batch of
positive earnings. So did U.S. equity futures ,
indicating a firm open for Wall Street. MSCI's broadest index of
Asia Pacific shares outside Japan hit a 6-1/2
month peak, though the blue-chip Nikkei dipped.

But it was the relentless rally in gold that held the
spotlight as prices hit a record around $2,044 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, which fell back towards recent
two-year lows, and falling U.S. yields have encouraged investors
to look for an 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.

DOLLAR WEAKER, AGAIN

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.

Concern about the U.S. economy as confidence in Europe's
outlook grows sparked fresh falls in the dollar.

The euro firmed 0.3% to $1.1839, the Australian
dollar rallied 0.7% and sterling was up 0.4% at $1.31.
In offshore markets, the Chinese yuan rose to a five-month high
of 6.9384 and was last up 0.5%.

That left the dollar index pushing back 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 Fed would
loosen policy further this year.

U.S. Treasury yields edged higher but kept their lows in
sight. Five-year Treasury yield hit a record low on
Tuesday and the benchmark 10-year yield fell to a five-month low
at around 0.51%.

Oil prices rose to their highest since early March after
data showed a big drop in U.S. crude inventories. Brent crude
was up $1.09, or 2.4%, at $45.52 a barrel, while West
Texas Intermediate oil rose $1.11 cents, or 2.7%, to
$42.83 a barrel.

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

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