Gold gains as dollar weakens on United States stimulus outlook

20 Janvier, 2021, 20:24 | Auteur: Auguste Feret
  • Gold price rises as focus turns to Biden administration

Jan 19 Investors in Asian markets were poised for gains on Wednesday after Wall Street indexes rose on the back of U.S. Treasury Secretary nominee Janet Yellen's push for a sizable fiscal relief package in response to the COVID-19 pandemic.

What you should know: At press time, Brent oil futures gained 0.68% to trade at $56.28 a barrel adding to yesterday's 2.1% gain.

"With more rounds of fiscal stimulus expected under the Joe Biden administration, further championed by Yellen's call to "act big", such measures could well pump up US inflationary pressures while boosting gold prices in tandem", said FXTM market analyst Han Tan.

"If U.S. bond yields start to slip back then gold will regain some of the attraction it lost.(if) Treasury yields remain fairly resilient, the upside for gold is likely to remain at the highs seen earlier this month".

Gold is generally considered a hedge against the inflation that can result from widespread stimulus.

Gold gains as dollar weakens on US stimulus outlook

U.S. Treasury yields and the dollar fell, in the wake of Yellen's speech.

Lower yields reduce the opportunity cost of holding non-yielding bullion.

Biden's $1.9 trillion stimulus package plan will be in focus after he is sworn into office on Wednesday, while emphasis will also be on the pace of vaccine distribution against COVID-19, which has claimed 400,000 deaths in the country.

"Gold at $2,000 is still achievable, probably by the middle of the second quarter when a good amount of people get inoculated and there's so much cash in the system with demand nearly coming back to normal", Howie Lee, an economist at OCBC Bank, told Reuters.

Silver rose 0.6% to $25.33 an ounce. Platinum rose 1.1% to $1,095.13 and palladium gained 0.6% to $2,367.29.

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