By Deep Kaushik Vakil
(Reuters) – Gold edged higher on Wednesday, helped by some safe-haven bids after Fitch downgraded the United States’ top credit rating, although an uptick in dollar capped bullion’s gains.
Spot gold was up 0.3% at $1,949.63 per ounce by 1026 GMT, while U.S. gold futures rose 0.4% to $1,986.80.
Ratings agency Fitch downgraded the U.S. government to AA+ from AAA, to reflect expected fiscal deterioration over the next three years and repeated down-the-wire debt ceiling negotiations.
Helping zero-interest-bearing gold, yields on benchmark 10-year bonds slipped after the downgrade, while Wall Street futures also tumbled on a flight to safety in global financial markets.
“We could, over the course of the second half of this year, start seeing a few cracks in corporate activity because they’re not going to the well for funds, which is potentially supportive for gold,” said StoneX analyst Rhona O’Connell.
However, rival safe-haven dollar ticked 0.2% higher, making gold more expensive for other currency-holders.
U.S. banks reported tighter credit standards and weaker loan demand from businesses and consumers during the second quarter, Federal Reserve survey data showed on Monday.
“The physical markets pretty much everywhere are quiet, including China, the Far East, India, and the Middle East, and there’s not much institutional interest at the moment either,” O’Connell said, adding “we’ve got a big week for U.S. numbers and nobody’s prepared to take any positions.”
Gold dropped 1% and hit a three-week low on Tuesday as the dollar firmed after relatively solid data on U.S. manufacturing and construction offset a decline in job openings to the lowest level in more than two years in June.
The focus remains on Friday’s non-farm payrolls report for July, a key barometer of the health of the U.S. economy.
Spot silver eased 0.1% to $24.31, platinum dropped 0.6% to $925.49 and palladium fell 0.5% to $1,234.27.
(Reporting by Deep Vakil in Bengaluru; Editing by Shailesh Kuber)
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