Gold drops while dollar strengthens in value

Gold declined, wiping out Tuesday’s gains, as the dollar strengthened and defensive shares pushed up equities in Europe.

Bullion rose on Tuesday, after slumping the most in three months the previous day as signs of a vaccine breakthrough hurt haven demand.

Optimism over the vaccine that’s helping drive global stock markets higher led Goldman Sachs Group Inc. to boost its price targets for Europe’s main equities gauge and the S&P 500 Index. A vaccination campaign could begin by spring, U.S. Health and Human Services Secretary Alex Azar said.

Still, there are concerns that the pandemic is worsening in some countries. The U.S. reported a record number of infections Monday and may go on to hit the most hospitalizations yet later this week.

“The biggest reason for another abrupt drop in gold prices would be more good news on the Covid-19 vaccine front,” James Steel, chief precious metals analyst at HSBC Holdings Plc, wrote in a note.

Some analysts said moves across financial markets on Monday in response to the vaccine news may have gone too far, with experts pointing to hurdles the shot has to clear. Investors are also keeping an eye on stimulus prospects and the U.S. presidential transition, as Donald Trump hasn’t dropped his challenge to the election result.

Trump’s campaign on Tuesday said it would file a federal lawsuit in Michigan that seeks to stop the state’s top election official from certifying Joe Biden’s win.