Gold rises on US stimulus hopes, dovish Fed stance

[BENGALURU] Gold ticked up on Friday as prospects of a substantial US pandemic relief package boosted the metal's appeal as an inflation hedge, while the Federal Reserve's dovish monetary policy stance also supported prices.

Spot gold rose 0.1 per cent to US$1,848.75 per ounce by 5.48am GMT, while US gold futures were flat at US$1,851.

"The stimulus is going to be bullish for asset markets and with the Fed chair quashing any prospects of raising interest rates or dialling down bond buying anytime soon, gold is supported," said Jeffrey Halley, a senior market analyst at Oanda.

But the price action in gold has consolidated and it is not showing any signs of trying to break out to the upside, Mr Halley said.

US President-elect Joe Biden unveiled a US$1.9 trillion stimulus package proposal on Thursday to jump-start the economy and accelerate coronavirus vaccinations.

Federal Reserve chair Jerome Powell on Thursday said there is no reason to alter the central bank's highly accommodative stance with the US economy still far from its inflation and employment goals.

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Easy monetary policy adds pressure on government bond yields and benefits non-yielding gold.

"Gold's upside looks constrained amid rising yield and buoyant risky assets. However, a weaker US dollar, stimulus expectations and depressed real interest rates should remain supportive," ANZ analysts said in a note.

Benchmark 10-year Treasury yields eased after touching a 10-month high earlier in the week, while Asian shares rose.

"Short term headwinds aside... if inflation expectations start to increase meaningfully and fast, gold will again become attractive. We expect gold prices to break above US$2,000 again," said Harshal Barot, a senior research consultant for South Asia at Metals Focus.

Silver eased 0.4 per cent to US$25.41 an ounce. Platinum fell 1.8 per cent to US$1,098.42, but rose 3 per cent so far this week, while palladium shed 1.1 per cent at US$2,383.11.

REUTERS