Gold continued to gain strength hitting a five-month high of $1916.4 in the key London market in the first week of June.
Investors and traders who sought safety in the US dollar earlier now turned their focus on returns that weighed down the sentiment of the US greenback.
In the meantime, the European Central Bank raised its growth and inflation projections while pledging a steady flow of stimulus in the latest policy meeting.
Rumours that US Fed will start to taper its massive bond buying program and rising inflation numbers are restricting traders from taking big bets on gold.
Many workers continue to remain at home due to government subsidies which discouraged them to find a job, which also weighed on the sentiment.
Concerns over the second and third wave of Covid-19 due to delay in vaccination in some emerging markets continue to support gold’s appeal as a safe asset.
Due to the Federal Reserve’s accommodative policy stance, the near term outlook of US dollar will be lacklustre and the threat of inflation remains on the cards.