Gold futures are edging higher on Wednesday for a second day as tentative investors reacted to chatter over the passage of a U.S. fiscal stimulus package. Gains were likely being limited by the U.K.’s approval of the Pfizer COVID-19 vaccine.
At 09:24 GMT, February Comex gold is trading $1826.00, up $7.10 or +0.39%.
A weaker U.S. Dollar also provided support from the dollar-denominated asset earlier in the session, but since then a rebound in the greenback has helped to cap gold’s gains.
US Senator McConnell Calls for New Stimulus
Gold price rallied on Tuesday as the dollar plunged to its lowest level in more than 2-1/2 years, as investors bet on the prospect of further fiscal stimulus from the United States.
News of a proposed COVID bill sank the dollar further, as did the resumption of talks between U.S. Treasury Secretary Steve Mnuchin and House of Representatives Speaker Nancy Pelosi on Tuesday about a stimulus package.
The proposed relief bill of $908 billion would fund measures through March 31, including $228 billion in additional paycheck protection funds for hotels, restaurants and other small businesses.
The general tendency is to sell the dollar and buy gold when reports over bipartisan stimulus deals make the headlines.
Pelosi said on Tuesday Mnuchin would review both bipartisan Senate proposal as well her and Senator Charles Schumer’s COVID relief plan.
Monetary Stimulus Coming Too?
Speculation is also growing that the Federal Reserve will act to support the economy through a tough winter before vaccinations become available. That should further weigh on the dollar.
The Fed meets to set policy on December 15-16.
Fed Chairman Jerome Powell and Treasury’s Mnuchin on Tuesday also urged Congress to provide more help for small businesses amid a surging coronavirus pandemic and concern that relief from a vaccine may not arrive in time to keep them from failing.
Gains Capped as UK Secures Millions of Pfizer Vaccine Doses
The U.K. expects to have millions of doses of the Pfizer vaccine against COVID-19 available by the end of the year, Health Secretary Matt Hancock said on Wednesday shortly after the order was approved by the U.K. medicines regulator.
“We’re expecting a matter of millions of doses for the whole of the U.K. by the end of the year, and I’m purposefully not putting a figure on it, because we don’t know,” he said on BBC Radio 4.
This week’s price action suggests traders should expect choppy, two-sided price action over the near-term as bullish news about stimulus drives out the short-sellers and brings in the speculative buyers, and vaccine hopes keep the pressure on prices since success could speed up the economic recovery, dampening the need for further fiscal and monetary help.
Traders should also start watching the comments from President-elect Joe Biden since they could offer valuable guidance for traders.
On Tuesday, gold pared early losses after the New York Times reported Biden will not immediately act to remove the Phase 1 trade agreement, which President Trump inked with China.
Biden also said his priority is getting a generous aid package through Congress even before he takes office on January 20.
For a look at all of today’s economic events, check out our economic calendar.