Gold futures headed higher for second straight session on Wednesday, with bullion buoyed by the revival of talks on a new U.S. coronavirus relief package, even as a rise in Treasury yields looks to offset the metal’s price gains.
Bullish buyers have also made the case that physical gold tends to be bought during the holiday period between November and December which is helping to buck up prices in recent trade.
On Wednesday, prices for the precious metal were supported by “the prospect of further U.S. fiscal stimulus and further global monetary support,” said analysts at ICICI Bank, in a note.
A bipartisan group of lawmakers have laid out a $908 billion plan on Tuesday, but some disappointment was seen later in that session after Senate Majority Leader Mitch McConnell, R-Ky., called for a $500 billion package and called for more “targeted relief” measures, according to news reports.
See: Endgame afoot on Capitol Hill as lawmakers mull fiscal stimulus, funding, defense bills
February gold was trading $5.50, or 0.3%, higher at $1,824.40 an ounce, after the commodity surged 2.1% on Tuesday and marked its biggest one-day climb in three weeks. Prices on Monday had touched their lowest settlement since July 1.
Video: U.S. futures suggest slight losses at the open after a strong start to December (CNBC)
“Gold’s seasonality flip from a typically negative November to positive December/January seems to have turned fashionable pretty quickly, with the 2.5% move higher in December already locked in the books,” said Stephen Innes, chief global markets strategist at Axi, in a market update.
Gold prices briefly added slightly to the day’s move up after a reading from Automatic Data Processing showed a rise of 307,000 U.S. private-sector jobs in November, below forecast for 420,000 jobs, according to economists average estimates surveyed by Econoday.
Gold’s more than 2% rise on Tuesday came as the U.S. dollar sank to its lowest level in about three years.
“Gold finally found its footing as a steep drop in the dollar and firming inflation outlook overshadowed surging bond yields,” resulting in a rally on Tuesday, said analysts in the latest newsletter for Sevens Report Research.
“We had expected gold to extend its recent decline towards $1,750, and it still may, but the longer-term outlook for gold remains bullish given the supportive fundamental backdrop of a downward trending dollar and rising inflation expectations,” they said.
On Wednesday, the dollar fell 0.2% to 91.11 as measured by the ICE U.S. Dollar Index DXY. A softer dollar can make gold which is priced in dollars more attractive to buyers using other monetary units.
Commodity traders also are paying attention to U.S. government bond yields, which have been rising, because they can undercut appetite for gold and other precious metals that don’t offer a coupon.
The 10-year Treasury note yielded 0.95% in Wednesday dealings, holding steady after a sizable pop on Tuesday.
Meanwhile, March silver fell 5.5 cents, or 0.2%, at $24.035 an ounce, after jumping 6.6% in the prior session.
March copper edged down by 0.6% to $3.465 a pound, a day after climbing to their highest levels since 2013.
January platinum added 1.6% to $1,019.70 an ounce and March palladium fell by 0.7% to $2,413.30 an ounce.