Gold Hits One-Week Peak on Progress in U.S. Stimulus Talks

Gold News

The prices of gold climbed to a new one-week high today as U.S. congressional leaders inch closer to an agreement on the COVID-19 stimulus bill. This progress pushed the U.S. dollar down to a two-year low. The Federal Reserve’s pledge to keep interest rate also provided additional support for the yellow metal.

Spot gold is currently trading at $1,874.93 per ounce as of 0808 GMT.

Yesterday, congressional negotiators continued to work on the COVID-19 aid bill as the deadline approaches. The package is expected to include billions of dollars to support small businesses, schools, vaccine distribution, expanded unemployment benefits and direct payments to Americans. In an indication of an imminent deal, Senator Majority Mitch McConnell urged senators to be ready to be in Washington through the weekend to finalize the deal and write the legislative text.

Another factor that favors the bullion is the 1.1% drop in U.S. retail sales in November. It is the first back-to-back monthly decline since April.

According to Patrick Collier and Nick Herbert of Credit Suisse, the impact of vaccine approvals and rollout on the gold price is likely to be temporary because the economy is still weak. They expect a low-interest-rate environment to remain for a few more years.

Ilya Spivak, a currency strategist at DailyFx, said the progress of U.S. lawmakers towards an agreement on the stimulus bill will not have a significant impact on gold because investors could be disappointed with the size of the fiscal package. Axi’s chief global market strategist Stephen Innes added that inflation would push the dollar lower and gold higher. The Fed promised to continue its bond-buying program until it hits the 2% inflation target.

European Commission President Ursula von der Leyen said Britain and the European Union moved closer to a new trade deal, but two issues remain unsolved. British Prime Minister Boris Johnson said he hoped the union would support a deal that respected Britain’s sovereignty.

GoldSilver Central’s managing director Brian Lan said the Brexit negotiations would affect gold prices in the coming days.

Meanwhile, market participants will be monitoring the release of initial jobless claims data in the U.S. for the second week of December and the policy decision of the Bank of England. The central bank is not expected to roll out additional stimulus given the possibility of a no-deal Brexit.