Gold Steady as Dollar Continues Decline on Biden Stimulus Bets

Gold held gains after surging on Wednesday as the dollar extended declines and Joe Biden was sworn in as U.S. president.

European shares and U.S. equity futures continued rising as global equities climbed to a record on Thursday on optimism that more stimulus under the Biden administration will drive a post-pandemic rebound. The dollar weakened for a fourth consecutive day as investors adopted more bullish positions, taking some pressure off gold.

“It’s all driven by the comments of Janet Yellen,” said Giovanni Staunovo, commodities analyst at UBS Group AG, referring to Biden’s pro-stimulus pick for Treasury secretary. That is “pushing up equities, weighing on the U.S. dollar, but also supporting inflation expectations, which is in my view the reason why gold trades again at $1,870 an ounce.”

Gold’s surge Wednesday lifted it above its 50-day moving average, which could alleviate some technical pressure. Still, the precious metal remains down this year after rising Treasury yields diminished its appeal as a haven.

Meanwhile holdings in gold-backed exchange-traded funds have remained largely steady this week. They were crucial to bullion’s rally to a record, and have helped mitigate falls in the price since. That could change if investors decide to trade their safe havens for risk assets.

“We expect a gradual decline in holdings, which should lead gold prices somewhat lower over the course of this year,” said Carsten Menke, an analyst at Julius Baer Group Ltd.

Gold Steady as Dollar Continues Decline on Biden Stimulus Bets

Spot gold declined 0.2% to $1,868.28 at 1:20 p.m. in London after climbing 1.7% on Wednesday. Silver was little changed at $25.8464 an ounce after ETF holdings jumped to 28,312.6 tons, according to data compiled by Bloomberg. Platinum and palladium rose. A gauge for the dollar weakened 0.3%, putting it on course for the longest losing streak since Dec. 17.

The European Central Bank kept its monetary policy unchanged on Thursday, reiterating that interest rates would stay low till inflation approached its target. Elsewhere, the Bank of Japan left its main policy unchanged after forecasting the economy will regain more lost growth than previously thought once it starts to recover from the current state of emergency. Federal Reserve policy makers hold their first meeting of 2021 next week.

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