Gold prices rose to a two-week high on Monday as momentum gathered towards a new fiscal stimulus in the US. Meanwhile, the dollar remains subdued, further supporting bullion.
Spot gold advanced 1.4% to $1,864.35/oz by 11:45 a.m. EST, after rising to its highest since November 23 at $1,868.26/oz earlier in the day. US gold futures rose 1.6% to $1,868.50/oz in New York.
With pressure mounting to help people and businesses hit hard by the covid-19 pandemic, the US Congress is aiming to scrape together a relief package this week. A bipartisan group of lawmakers is working to release a more detailed outline of its $908 billion aid proposal later in the day.
“The stimulus plan has helped stabilize the gold market because more money being pumped into the financial system is inflationary,” Kitco Metals senior analyst Jim Wyckoff told Reuters.
Bullion is widely considered a hedge against inflation that could result from the large stimulus measures unleashed in 2020, gaining 22% so far this year.
“This is a seasonally strong period for gold prices and we just went through a capitalization event, in which a lot of the weaker hands in gold have been shaken out of the market,” said Daniel Ghali, commodity strategist at TD Securities.
Gold has recovered more than 5% since slumping to a five-month low at the end of November, marking its worst month in four years, as hopes of a vaccine-fueled economic recovery steered investors away from safe-haven assets.
On the technical front, the breach of the $1,850 level, which was touted as an important resistance, signals further recoveries for gold, analysts said.
Bullion also shook off pressure from earlier in the session on Britain’s plan to become the first nation to roll out the Pfizer/BioNTech vaccine this week.
(With files from Reuters)