Gold gains as US stimulus prospects weigh on dollar

  • Date: 20-Jan-2021
  • Source: Arab News
  • Sector:Economy
  • Country:Middle East
  • Who else needs to know?

Gold gains as US stimulus prospects weigh on dollar

Gold prices rose on Wednesday as expectations for a massive US stimulus to help the world's largest economy recover from the coronavirus jolt bolstered bullion's appeal as an inflation hedge and pressured the dollar.

Spot gold gained 0.5 percent to $1,848.30 per ounce by 0239 GMT. US gold futures added 0.4 percent to $1,847.30.

Janet Yellen, US President-elect Joe Biden's Treasury Secretary nominee, at her confirmation hearing on Tuesday urged lawmakers to "act big“ on coronavirus relief spending, adding that the benefits outweigh the expenses of a higher debt burden.

"Given the very dovish approach from Yellen as well as Biden's stance towards fiscal stimulus, gold is responding to the idea of higher inflation expectations,“ said Howie Lee, an economist at OCBC Bank.

Although in the near term, gains in gold will be limited due to higher yields and some dollar strength, he added.

The dollar index eased further from a four-week high hit earlier in the week, while most US Treasury yields fell after Yellen said that tax cuts enacted in 2017 for large corporations should be repealed.

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

Biden will be sworn into office on Wednesday and investors will be focused on his $1.9 trillion