Gold inches down as vaccine rollout counters US stimulus hopes

[BENGALURU] Gold prices eased on Monday as the rollout of a Covid-19 vaccine lifted riskier assets, overshadowing expectations of more US fiscal and monetary stimulus.

Spot gold fell 0.2 per cent to US$1,836.08 per ounce by 3.03am GMT, while US gold futures eased 0.2 per cent to US$1,839.90.

"The euphoria around a Covid-19 vaccine will likely overshadow further easing from the Federal Reserve and a fiscal relief package in the near term," said Howie Lee, an economist at OCBC Bank.

"But gold could rally in 2021 when the vaccine optimism dies down and investors' focus returns to rising inflation expectations due to the large swathe of monetary and fiscal stimulus the US economy still requires."

The first shipments of Pfizer and BioNTech's approved coronavirus vaccine in the United States began on Sunday, raising hopes for a faster economic recovery and lifting Asian equities.

But gold's losses were limited by hopes of further US fiscal stimulus, with Reuters reporting that a US$908 billion relief plan will be split in two in an effort to win approval and could be introduced as early as Monday.

A leading Democrat lawmaker also suggested his party might be willing to reach a compromise on the relief package.

The focus now turns to the US Federal Reserve's two-day policy meeting starting on Tuesday, with investors betting on increased purchases of longer-dated Treasuries to contain a rise in yields, pulling down the dollar.

Gold, considered a hedge against inflation and currency debasement, has gained 21 per cent so far this year on the back of near-zero interest rates and unprecedented global stimulus.

Speculators raised their bullish positions in Comex gold and silver contracts in the week to Dec 8, the US Commodity Futures Trading Commission said on Friday.

Silver rose 0.2 per cent to US$23.97 an ounce, while platinum gained 0.8 per cent to US$1,017.34 and palladium gained 0.4 per cent to US$2,328.74.

REUTERS