Gold price sprints to nine-year peak on softer dollar, stimulus bets

Gold jumped more than 1% on Wednesday to its highest in nearly nine years, driven by a weaker dollar and as expectations of more stimulus to resuscitate pandemic-hit economies lifted the metal`s appeal as an inflation-hedge. Spot gold was up 0.9% at $1,857.86 per ounce by 0232 GMT, after hitting its highest since September 2011 at $1,865.35 earlier in the session. U.S. gold futures rose 0.8% to $1,858.20.

"The spectre of these stimulus packages has pushed investors back into non-yielding assets like gold," said ANZ analyst Daniel Hynes.

"The likelihood of interest rates remaining low for the foreseeable future and the weaker U.S. dollar have really boosted investor appetite."

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European Union leaders on Tuesday sealed a 750 billion euro recovery plan, while White House officials and top congressional Democrats discussed a next round of relief that would include extended unemployment insurance and more money for schools.

Helping bullion`s rally, the dollar index held near a more than four-month low.

Coronavirus cases continued to surge in the United States, with President Donald Trump warning the virus would probably get worse before it gets better.

Underscoring the pandemic`s impact, Japan`s factory activity contracted for a 15th straight month in July.

Central banks have slashed interest rates and rolled out a wave of stimulus measures to cushion the economic damage from the pandemic, helping gold prices surge over 22% so far this year.

"Gold markets continue to receive their jet fuel from two critical ingredients: government debt and central bank liquidity," Stephen Innes, chief market strategist at financial services firm AxiCorp, said in a note.

A Reuters poll showed the metal could push towards record highs over the next 18 months as the crisis encourages investors to hoard it as a hedge against possible turmoil in wider markets.

Silver soared again, rising 5% to $22.40 per ounce, its highest since October 2013.

Palladium fell 1.2% to $2,132.73 and platinum eased 0.1% to $880.60.