Gold inches up as weaker dollar outweighs US stimulus worries

[BENGALURU] Gold edged higher on Friday as the dollar hovered near a two-and-a-half-year low, helping offset concerns over delays in a US pandemic rescue package.

Spot gold rose 0.1 per cent to US$1,836.27 per ounce by 3.23am GMT. US gold futures gained 0.2 per cent to US$1,840.30.

"The correlation between gold and dollar has returned because markets have more or less priced in the vaccine optimism," said Margaret Yang, a strategist at DailyFX.

Gold needs a very strong catalyst to break its descending trend and that could be in form of a dovish Federal Reserve, a larger than expected US fiscal stimulus bill or the unlikely failure of vaccines, she added.

The US dollar index was down 0.2 per cent and traded close to 90.5, its lowest since April 2018, making gold cheaper for other currency holders.

Meanwhile, data on Thursday showed US weekly jobless claims jumped to a near three-month high, further evidence that rising Covid-19 infections and lack of additional fiscal stimulus were hurting the economy.

Capping bullion's gains, however, a top Democrat suggested talks over Covid-19 stimulus package could drag on through Christmas. The US Senate will likely vote on a stopgap measure to keep the government running on Friday.

Gold is seen as a hedge against inflation and currency debasement likely to result from large stimulus measures.

The European Central Bank rolled out more stimulus measures on Thursday to lift the currency bloc's economy out of a double-dip recession.

Gold prices will remain elevated in 2021 due to accommodative rates and a weaker dollar, Fitch Solutions said in a note, adding that the improved economic outlook has reduced the possibility of significant upside.

Silver fell 0.1 per cent to US$23.92 an ounce and palladium was up 0.1 per cent at US$2,333.24. Platinum fell 0.1 per cent to US$1,025.99 and was set to decline 2.7 per cent this week.

REUTERS