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PRECIOUS-Gold fights back after steep decline as slowdown fears persist
Published at 12/08/2020 at 19:17

* Britain's economy shrank by a record 20.4% in Q2

* Interactive graphic tracking global spread of coronavirus: open in an external browser

(Updates prices)

By Sumita Layek

Aug 12 (Reuters) - Gold recovered on Wednesday after dipping below the key $1,900 level earlier and a day after registering its worst fall in seven years as bleak economic data underscored concerns over a pandemic-led slowdown.

Spot gold climbed 1.4% to $1,937.42 per ounce by 1:55 pm EDT (1755 GMT), after declining as much as 2.5% earlier. U.S. gold futures settled up 0.1% at $1,949.

On Tuesday, gold slumped as much as 6.2%, for its worst one-day fall since April 2013. Silver , which on Tuesday declined 15%, its biggest fall since October 2008, on Wednesday was 4.3% higher at $25.85.

"That decline was a healthy correction, it allows more people to get in, so prices will rally again and by the end of the year we'll see new all-time highs with gold at probably $2,500 per ounce and silver at $35," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

"We have all the same fundamental factors that supports gold," he said. "The U.S. Federal Reserve is going to remain dovish for an extended period of time, they have already said that they will allow inflation to rise above their targets."

Large stimulus measures tend to support gold, which is often considered a hedge against inflation.

Concerns over the economic damage caused by the pandemic as Britain's economy shrank by a record 20.4% in the second quarter buoyed gold's appeal along with a weaker dollar, which slid 0.3%.

"The global economy still faces a host of problems which have the capacity to support gold," James Steel, chief precious metals analyst at HSBC said in a note.

"This includes geopolitical risks and ongoing monetary and fiscal stimulation. These factors will cushion further declines."

All eyes are on a U.S. coronavirus aid after talks between White House and top Democrats in Congress broke down last week.

Elsewhere, platinum rose 0.7% to $936.36 per ounce, while palladium gained 1.5% to $2,122.11.

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(Reporting by Sumita Layek in Bengaluru; Additional reporting by Anjishnu Mondal Editing by Alistair Bell and Leslie Adler)

((Sumita.Layek@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 8061822693; Reuters Messaging: Sumita.Layek.thomsonreuters.com@reuters.net))