Gold at one-week high as focus shifts to Federal Reserve

Bengaluru — Gold rose to a one-week high on Wednesday on market hopes for further fiscal support for the US economy and expectations that the US Federal Reserve will keep a lid on interest rates.

Spot gold was up 0.5% at $1,862.30/oz after touching its highest since December 9 at $1,865.14.  US gold futures rose 0.6% to $1,866.20.

“If we get a Brexit deal over the line, a stimulus deal in the US and the monetary stimulus package from the Fed this week, which is extremely possible, that could put gold on a more positive trajectory and take some volatility out of the markets going into year-end,” said Oanda analyst Craig Erlam.

The European Commission president Ursula von der Leyen said there had been progress on a trade deal with Britain at the end of the Brexit transition period.

In the US, meanwhile, congressional leaders were optimistic on Tuesday about ending a months-long stand-off on stimulus to contend with the coronavirus crisis.

Also on investors' radar is the Fed's final policy statement of the year later on Wednesday. The US central bank is widely expected to keep interest rates pinned near zero.

Non-yielding gold has risen 22% in 2020 as unprecedented stimulus has been unleashed globally. “But if (the Fed) fails to deliver, we could be seeing gold moving back towards November lows,” Erlam said.

In other precious metals, silver gained 2.6% to $25.12/oz. Silver has outshone gold of late, given the improving prospects of industrial demand into 2021. Among the autocatalysts, platinum was up 0.9% at $1,046.09/oz, having hit a more than one-week high of $1,045, while palladium rose 0.9% to $2,338.50.

Expectations of an economic rebound in 2021 should support platinum, said Harshal Barot, a senior research consultant for South Asia at Metals Focus.

Reuters