Gold firms as US dollar slides to multi-year low

[BENGALURU] Gold prices edged higher on Wednesday, as the prospect of increased fiscal aid pushed the US dollar to its lowest in more than two years, although global Covid-19 vaccine rollouts and increased risk appetite limited bullion's gains.

Spot gold rose 0.7 per cent to US$1,890.61 per ounce by 1.47pm EST (1847 GMT). US gold futures settled up 0.6 per cent at US$1,893.40.

"The US dollar index touched a new low - that's working in favour of the gold and silver markets," said Kitco Metals senior analyst Jim Wyckoff.

"However, upbeat risk appetite in the market place, evident by stock indexes at or near record highs is tempering buying enthusiasm. You've got this tug and pull at work right now."

The US dollar index touched a low since April 2018 following US Senate Majority Leader Mitch McConnell's decision to delay a vote on increasing Covid-19 relief checks to US$2,000.

US stocks rose on hopes of additional fiscal stimulus and on optimism over vaccine rollouts, as Britain became the first country to approve a vaccine developed by AstraZeneca and Oxford University.

"The bigger picture is that gold is still holding up incredibly well at these price levels and the fiscal and monetary stimulus will still be there in 2021 as the pandemic is hitting hard in the US, Europe," said Bank of China International analyst Xiao Fu.

Investors await the Jan 5 Georgia runoff elections that will determine which political party will control the US Senate, with expectations for more stimulus under a Democrat-controlled Senate and House.

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

Among other precious metals, silver rose 1.1 per cent to US$26.46 an ounce, platinum gained 1.5 per cent to US$1,065.26 and palladium climbed 1.9 per cent to US$2,371.25.

REUTERS