Gold inches higher on weaker dollar and hopes for US stimulus
Failure to deliver a fiscal package is supportive for bullion, analyst says
Bengaluru — Gold edged higher on Monday, as a softer dollar and hopes of further US monetary stimulus offset optimism over the quick rollout of a Covid-19 vaccine and bolstered the precious metal’s appeal.
Spot gold rose 0.1% to $1,872.76 per ounce by 5.27am and US gold futures were little changed at $1,871.80. US Treasury secretary Steven Mnuchin on Friday reassured markets that the Fed and Treasury have many tools left to support the economy, after deciding to de-fund several Federal Reserve lending programmes by the end of the year.
“Ironically, failure to deliver a fiscal package is supportive for gold,” said Michael McCarthy, chief strategist at CMC Markets, adding there might be more reliance on Fed support, which will take the form of liquidity and lower interest rates. Non-yielding gold is often seen as a hedge against inflation that is likely to result from stimulus measures.
Novel coronavirus cases crossed 12-million at the weekend in the US, while rising cases in Germany fuelled worries over an extended lockdown. Also lending support to bullion was a softer US dollar that reduced the cost of purchasing it to other currency holders.
While interest rates are likely to remain low and the dollar weaker next year, investors may be less inclined to chase prices higher and patiently wait for buying the dips opportunities, Avtar Sandu, senior commodities manager at Phillip Futures, said in a note.
Meanwhile, a broad gauge of Asian shares touched record highs buoyed by vaccine hopes. Though gold has found support near $1,875, a technical level, there are downside risks from a potentially stronger dollar that could push the metal down to $1,800-$1,790, CMC Markets’ McCarthy said.
Silver firmed 0.4% to $24.25 an ounce. Platinum rose 0.1% to $946.75, while palladium was up 0.4% at $2,334.23.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.