* Gold runs into profit-taking after rise
* Dollar steadies near two-year lows, breaks major chart
support
* Shares take comfort in stimulus, Fed policy
* Graphic: 2020 asset performance http://tmsnrt.rs/2yaDPgn
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, July 28 (Reuters) - Gold hit a record high on
Tuesday before the sheer scale of its gains drew a burst of
profit-taking, which in turn helped the dollar up from two-year
lows and kept equity markets subdued.
The precious metal had risen by almost $40 at one point to
reach $1,980 an ounce XAU= only for a wave of selling to suck
it back down as far as $1,915.
Gold is still up over $125 in little more than a week as
investors bet the Federal Reserve will reaffirm its super-
accommodative policies at its meeting this week, and perhaps
signal a tolerance for higher inflation in the long run.
"Fed officials have made clear that they will be making
their forward guidance more dovish and outcome-based soon,"
wrote analysts at TD Securities. "The chairman is likely to
continue the process of prepping markets for changes when he
speaks at his press conference."
One shift could be to average inflation targeting, which
would see the Fed aim to push inflation above its 2% target to
make up for years of under-shooting.
The retreat in gold took some steam out of stocks. Europe's
STOXX 600 .STOXX and Wall Street future's ESc1 both gave up
modest gains to stand 0.25% to 0.5% lower after Asia-Pacific had
eked out gains thanks to China .CSI300 , Hong Kong .HSI and
Korea. .KS11 .MIAPJ0000PUS .
Japan's Nikkei .N225 finished down again, though, and
E-Mini futures for the S&P 500 were back in the red after a 1.7%
rebound from the Nasdaq had helped markets back up on Monday.
That rise was again led by technology stocks as investors
wagered on upbeat earnings reports due this week. Analysts also
noted the falling dollar helped, since more than 40% of S&P 500
earnings come from abroad.
The rest of the week will see 179 S&P 500 companies
reporting second-quarter earnings, including Google, Amazon and
Apple. Drug company Pfizer and fast-food chain McDonald's are
among the big names reporting on Tuesday. .N
Shoqat Bunglawala, head of European and Asian portfolio
solutions at Goldman Sachs Asset Management, said his firm was
now "neutral" on a cross-asset basis but there had been some
positives from earnings.
"We have seen around 81% of firms that have beat
expectations (so far), so although the expectations have been
very low, at least they have beaten them."
DOLLAR IN DECLINE
There were also hopes a stimulus extension could be agreed
in the United States. U.S. Senate Republicans were trying to
complete details of a $1 trillion to $1.5 trillion coronavirus
aid proposal before enhanced unemployment benefits expire on
Friday. The proposal could cut unemployment benefits to $200 from
$600, which would be a blow to household incomes and spending
power. Some 30 million Americans are out of work and states are
tightening lockdown restrictions again, a trend that has also
dragged on the U.S. dollar.
Alan Ruskin, head of G10 strategy at Deutsche Bank, noted
currencies had been tracking the relative performance of their
economies, so that high-ranked economic performance was
associated with stronger currencies.
"One clear pattern is how economies linked most tightly to
China -- including commodity producers as diverse as Australia,
Chile and Brazil -- have tended to perform better than economies
most directly linked to the U.S., notably its NAFTA trading
partners," said Ruskin.
The dollar has been falling almost across the board for
month. It reached a two-year low against a basket of currencies
at 93.416 overnight before recovering to 93.975 =USD .DXY .
The euro EUR= dropped back to $1.1715 after rising to its
highest in two years at $1.1781. The dollar had touched its
lowest against the Swiss franc since mid-2015 CHF= . It also
fell to a four-month low of 105.10 against the Japanese yen
JPY= before squatting at 105.25.
The reversal in the dollar combined with the uncertainty
over COVID-19 and the prevalence of negative real bond yields
has propelled gains by precious metals, and not just gold.
Silver XAG= rose as high as $26.16 at one point, the
highest since April 2013 and a gain of 33% in seven sessions,
before sliding back 4% in London to stand at $23.5 an ounce.
GOL/
Oil prices also tend to benefit from a falling dollar but
have been hampered by worries about demand as countries impose
more travel restrictions. O/R
Brent crude LCOc1 futures edged up 4 cents to $43.45 a
barrel. U.S. crude CLc1 eased 9 cents to $41.51.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Gold soars, dollar dips https://tmsnrt.rs/2P4Uqw5
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