Gold Scales Two-week Peak On Bets For U.S. Fiscal Support

Gold rose to a two-week high on Tuesday, buoyed by a muted dollar and growing expectations of more U.S. fiscal stimulus to combat the economic impact of rising coronavirus cases.

Spot gold gained 0.2% to $1,866.76 per ounce by 10:23 a.m EST (1523 GMT). Earlier, it touched its highest since Nov. 23 of $1,875.07.

U.S. gold futures were up 0.3% at $1,871.60.

“The need for the U.S. Congress to pass some form of fiscal stimulus is clear. Further fiscal spending is positive for gold, and the market appears to be anticipating some type of fiscal package passage, even if only temporary,” James Steel, chief precious metals analyst at HSBC, said in a note.

But while a broadly defensive dollar, negative real rates and a “merciless rise in COVID-19 cases” are positive for gold and silver, “more good news on the vaccine front would be a powerful negative.”

Raising gold’s appeal for other currency holders, the dollar index held near 2-1/2-year lows.

Amid mounting coronavirus cases, the U.S. Congress is expected to vote this week on a one-week stopgap funding bill to provide more time to reach a deal on COVID-19 economic relief.

Gold, considered a hedge against inflation and currency debasement, has risen more than 23% this year, benefiting from near-zero interest rates and the risk of higher inflation likely to result from massive stimulus globally.

Meanwhile, Britain began its vaccination against COVID-19 on Tuesday.

“The vaccine is more widely available for the rest of the population only next year, not now. The challenges on the economic side are still present and we still need support from the fiscal or monetary side,” said UBS analyst Giovanni Staunovo, adding the vaccine may negatively impact gold in the second half of 2021.

Silver was steady at $24.51 per ounce, while palladium fell 1.5% to $2,295.50 and platinum was up 0.5% at $1,026.50.

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