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Gold futures are returning after rising to record highs

Gold futures reversed on Tuesday and the yellow metal slipped to record highs after a rally.

With the lead contract as high as $ 1,974.40 an ounce overnight, gold futures GC00,
-0.67%
fell $ 23.80 to $ 1,907.20 an ounce.

China’s gold consumption fell 38% year-on-year in the first half of 2020, the China Gold Association said, news that may have contributed to Tuesday’s weakness.

Gold still rocketed last week, gaining over 25% this year.

The rollout of the $ 1 trillion Republican stimulus plan in the Senate raised further concerns about monetary financing of government spending, and the Federal Reserve opened a two-day meeting on interest rate fixing on Tuesday. Gains for gold also come amid the tense relationship between the US and China.

Looking at the broader picture, analysts at BCA Research say that the dollar’s weakness is just one factor behind gold’s rise, pointing out that gold has appreciated against many currencies.

“The collapse in real returns was the link between easy policy and gold. While central banks inject liquidity, real rates fall and the alternative costs of holding gold fall. Central banks remain successful in their easing attempt. Even if nominal yields have risen flatly or slightly, inflation expectations continue to rise and real yields fall, ”they said in a note to customers.

They said, “gold will continue to bid until Treasury delivers TMUBMUSD10Y,
0.616%
start to rise with their 0.6% readings. “

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