Gold scales 1-1/2-month high on US stimulus deal boost

Gold scales 1-1/2-month high on US stimulus deal boost

Representative image. Credit: iStock photo.

Gold prices jumped as much as 1% on Monday to a near one-and-a-half-month high, driven by news that an agreement on a long-awaited US fiscal stimulus deal had been reached. Spot gold rose 0.8% to $1,896.39 per ounce by 0308 GMT, having earlier hit its highest since November 9 at $1,899.29.

US gold futures gained 0.7% to $1,902.70. US congressional leaders reached an agreement on a $900 billion Covid-19 stimulus package on Sunday, with votes likely on Monday.

"Now that we've got fiscal stimulus behind us, gold has enough momentum to close above $1,900 by year-end and it could even climb up to $1,925, said Stephen Innes, chief global market strategist at financial services firm Axi.

"If you coalesce the stimulus package with optimism for the Federal Reserve to cap longer-dated yields given it signalled a continuation to its bond-buying programme last week, we could see gold remain supported on dips until at least March 2021".

The Fed last week vowed to keep funnelling cash into financial markets and keep rates low until a US economic recovery is secure. Gold's advance came despite a stronger dollar, which firmed on tightening of lockdowns globally.

"The worsening pandemic is curbing global economic growth and is forcing global central banks to remain highly dovish, which is bullish for gold as a store of value," Avtar Sandu, senior commodities manager at Phillip Futures, said in a note.

Lower interest rates reduce the opportunity cost of holding gold. Speculators upped their bullish positions in COMEX gold and silver contracts in the week to Dec. 15, data showed on Friday.

Silver rose 3.3% to $26.61 an ounce, having hit its highest since Sept. 21 at $26.71 earlier in the session. Platinum rose 0.6% to $1,042.74 and palladium gained 0.5% to $2,371.76.