The prices of gold jumped to a six-week peak after U.S. legislators finally agreed on the provisions of the COVID-19 stimulus package. Lockdowns in the UK due to a new strain of coronavirus provided additional support for the yellow metal. But gains were capped by a stronger dollar, which rose 0.2% against a basket of viral currencies that made the bullion more expensive for investors using other currencies.
Spot gold is currently trading $1,896.92 per ounce as of 0859 GMT.
U.S. Congressional leaders finally reached an agreement on the $900 billion coronavirus relief bill. It includes billions of dollars for food assistance, small businesses, transit and vaccine distribution. The package also provides $25 billion in rental aid, raises unemployment payments by $300 per week and extends the moratorium on foreclosures.
According to House Democratic leader Steny Hoyer, the House of Representatives will vote on the bill on Monday. White House Spokesman Ben Williamson added that President Donald Trump supports the package and will sign it into law.
Meanwhile, The British government has imposed lockdowns in London and southeast England due to a new coronavirus strain. Neighboring countries already implemented a ban on travelers from the UK. Other countries are still monitoring this new strain, which appears to be 70% more infectious or transmissible.
CMC Markets’ chief strategist Michael McCarthy noted that the yellow metal has regained its status as a safe-haven asset because of fresh lockdowns due to the new strain of the coronavirus, which changed the broad market sentiments. Axi’s chief global market strategist Stephen Innes added that the Federal Reserve’s plan to continue its bond-buying program would support gold prices for at least until the first quarter of 2021. He expects the bullion to finish the year at around $1,900-$1,925 per ounce.
In physical trading, gold prices in India rose for the first time in six weeks and dented local demand. Gold purchases in other Asian hubs also slowed down ahead of the holidays. In Russia, the central bank reported that its gold reserves were 73.9 million troy ounces at the start of December.
In a related development, the U.S. Commodity Futures Trading Commission (CFTC) reported that money managers and hedge funds raised their bullish stance in COMEX gold contracts for the week that ended on December 15.