Gold jumps 1% as US dollar slides on stimulus bets

[BENGALURU] Gold climbed more than 1 per cent on Friday as the US dollar retreated to a near three-week low and increased bets for fresh US stimulus pushed investors to bullion as a hedge against likely inflation.

Spot gold rose 1.5 per cent to US$1,920.92 per ounce by 1.31pm EDT (1731 GMT), en route to a second straight weekly gain, of about 1.2 per cent. US gold futures settled up 1.6 per cent at US$1,926.20.

"It seems like a lot of optimism is being built around it (US stimulus)" and "that's really at the forefront" of gold's move, said Eli Tesfaye, senior market strategist at RJO Futures.

A further drop in the US dollar could add more fuel, and given the strong technical momentum, bullion could soon hit highs seen in August, Mr Tesfaye added.

After stalling talks with Democrats on a comprehensive aid package earlier this week, US President Donald Trump called for a "skinny" relief bill that would include a bailout of the struggling airline sector.

Additionally, a widening lead for Democratic presidential candidate Joe Biden has raised the prospect of further stimulus, adding to gold's allure.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The US dollar meanwhile slid as expectations grew for a Biden win, making gold cheaper for those holding other currencies.

"In fact, the long gold trade is likely agnostic to the election outcome," TD Securities analysts said in a note.

"Barring a split government outcome, both administrations are likely to push through a large-scale fiscal deal in no time that would help de-bottleneck the real rate suppression, lifting precious metals in the process."

Near-zero interest rates and unprecedented money printing by central banks to ease the economic blow from the coronavirus pandemic have driven a 26 per cent rally for gold this year.

Silver jumped 4.4 per cent to US$24.87 per ounce and is up about 5 per cent so far this week. Platinum rose 2.6 per cent to US$884.28 and palladium climbed 2.9 per cent to US$2,440.68 per ounce.

REUTERS