Gold Climbs on U.S. Stimulus Outlook, Fed Bets, Virus Lockdowns
A selection of gold bars of various weights . (Photographer: Chris Ratcliffe/Bloomberg)

Gold Climbs on U.S. Stimulus Outlook, Fed Bets, Virus Lockdowns

Gold rose after the unveiling of a possible new U.S. spending package with traders anticipating fresh guidance on monetary policy from the Federal Reserve at its last meeting of the year.

Treasury Secretary Steven Mnuchin will call in to House Speaker Nancy Pelosi‘s meeting with other congressional leaders Tuesday afternoon to discuss Covid-19 relief and a crucial government spending package. A bipartisan group released a slimmed-down proposal for a $748 billion Covid-19 aid package that separated out the two most contentious and partisan issues.

“The combination of additional stimulus and lower yields should keep real rates reverting on a downward trajectory and weigh on the dollar, fueling capital allocations into precious metals,” TD Securities analysts led by Bart Melek said in a note. The Fed, which may extend Treasury purchases after officials meet Tuesday and Wednesday, “should further reinvigorate speculative interest in gold, which has suffered from massive ETF outflows over the last six weeks,” according to the note.

Gold Climbs on U.S. Stimulus Outlook, Fed Bets, Virus Lockdowns

Spot gold rose 1.4% to $1,852.40 at 2:26 p.m. in New York after a 0.7% drop on Monday. The metal has gained 22% this year, reaching a record in August. Futures for February delivery on the Comex gained 1.3% to settle at $1,855.30 an ounce.

Silver climbed 2.7%, while platinum and palladium gained. The Bloomberg Dollar Spot Index fell 0.4%.

Gold’s swings in recent weeks were dominated by developments on Covid-19 vaccines and prolonged stimulus talks in the U.S. The metal is heading for the first quarterly loss since 2018. Demand for a haven may get a boost from anti-virus curbs being rolled out in major economies including Germany and the U.K.

“Prices are looking vulnerable but should once again be saved by the Fed,” said Edward Moya, senior market analyst at Oanda Corp. “Economic scarring will undoubtedly make it easier for the Fed to continue to provide more accommodation, and that could make many traders want to jump back in.”

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