Metals Stocks: Gold prices climb on talk of further U.S. fiscal stimulus

United States

Gold futures climbed on Wednesday, on track for their highest finish in nearly two weeks, as expectations for further fiscal stimulus measures under the Biden administration  looked to pressure the U.S. dollar, boosting  prices for the dollar-denominated precious metal.

The market expects additional fiscal stimulus measures to be “announced very soon,” providing support for gold, said Chintan Karnani, chief market analyst at Insignia Consultants. In testimony to the Senate Financial Committee Tuesday, incoming President Joe Biden’s nominee for head of the Treasury Department, Janet Yellen said the U.S. should “act big” on the economy.

More stimulus would create more debt, which would lead to a weaker dollar, which can boost prices for gold. The greenback was little changed Wednesday, as measured by the ICE U.S. Dollar Index DXY, +0.04%, but traded lower for the week so far.

Even so, Yellen said the U.S. “does not seek a weaker currency to gain competitive advantage,” as the Biden administration attempts to extricate the country from a virus-induced recession.

Read: Why dollar bears aren’t afraid of Janet Yellen

Karnani, meanwhile, told MarketWatch that U.S. Treasury yields “will fall if and when additional stimulus is announced,” and lower bond yields are bullish for gold.

February gold GC00, +1.32% GCH21, +1.31% climbed by $ 28.40, or 1.5%, to trade at $ 1,868.60 an ounce. A settlement around this level would be the highest for a most-active contract since Jan. 7, FactSet data show.

Silver for March delivery SI00, +1.52% SIH21, +1.52%, meanwhile, added 46.5 cents, or 1.8%, at $ 25.785 an ounce, after a 1.8% rally on Tuesday.

Bullish gold investors made the case that accommodative central banks across the globe and Biden’s legislative agenda, highlighted by an ambitious $ 1.9 trillion coronavirus relief proposal, will ultimately provide support for gold and weaken the greenback.

The European Central Bank on Thursday is expected to emphasize its intention to maintain easy-money policies as the viral outbreak continues to hobble the eurozone economy and cause fresh lockdowns.

“Investors are also expecting the ECB to signal its intention at its policy meeting this week to keep the current expansive monetary policy stance for a long time to come to support the Eurozone recovery,” wrote Fawad Razaqzada, market analyst at ThinkMarkets.

For now, gold prices are “dependent in the short term on a combination of additional stimulus announcement, trend of [the] greenback and direction of bond yields,” said Karnani.  

In other Comex metals trading, March copper HGH21, +0.10% tacked on 0.1% to $ 3.637 a pound. April platinum PLJ21, +2.03% rose 2% to $ 1,114.30 an ounce and March palladium PAH21, +1.16% traded at $ 2,394 an ounce, up 1.2%.