Gold prices went up today and remained close to a one-week high reached in the previous trading session. The expected passage of the U.S. COVID-19 relief bill and the weaker dollar lifted the prices of the yellow metal. The stimulus hopes bolstered demand for the bullion as a hedge against inflation, while the soft greenback made gold less expensive for investors using other currencies. The dollar index dropped near a two-week low against a basket of rival currencies.
The weaker-than-expected jobs growth in December indicated an employment decline, which strengthened the case for the passage relief package to accelerate economic recovery from the COVID-19 pandemic.
The higher inflation rate in the U.S. boosted not only gold prices but also Treasury yields, which increased the opportunity cost for holding gold.
Spot gold is currently trading at $1,843.67 per ounce as of 0817 GMT.
Jeffrey Halley, a senior market analyst at OANDA, suggested that the current movements of gold and the dollar is more about the story of the latter than the former. He argued that the biggest factor for the bullion now is the inflation rate. A higher figure could boost the dollar and push the precious metal lower. Amit Kumar Gupta of Adroit Financial Services added that gold could struggle to get past the $1,850 level given the rising interest rates.
Meanwhile, Congress is expected to pass President Joe Biden’s $1.9 trillion COVID-19 relief plan with minimal changes despite opposition from Republican legislators. Though the president remains firm on the size of individual check payments, he is open to making some adjustments. The latest proposal from the Democrats is to phase payments at lower income thresholds and cut individuals who earn more than $100,000 and couples that earn more than $200,000 annually.
Market participants are waiting for Federal Reserve Chairman Jerome Powell’s speech at the Economic Club of New York event later today. He is expected to reiterate their commitment to maintaining an accommodative monetary policy. The market is also monitoring the release of U.S. consumer price index data for January due today at 1330 GMT.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, fell by 0.4% yesterday from 1,152.43 to 1,148.34 tons