Gold hits two-week peak on US stimulus bets

Gold prices scaled a two-week high on Tuesday on hopes that US lawmakers would agree on a fiscal stimulus deal to cushion the economic blow from surging coronavirus infections.

Spot gold rose 0.3% to $1,869.06 per ounce by 0504 GMT, having touched its highest since Nov. 23 of $1,871.52 earlier in the session.

US gold futures were up 0.4% at $1,873.50.

"Markets more or less are pricing in that a deal will get done ... It's going to be about how large that package happens to be, how soon it comes and how that manifests in inflation expectations going forward," said IG Markets analyst Kyle Rodda.

Rodda, however, warned a re-strengthening of the dollar due to stalled stimulus talks or Brexit uncertainty posed a risk to gold prices.

The US Congress will vote this week on a stopgap funding bill to provide more time to reach a deal on COVID-19 relief, while US Senate Democratic leader Chuck Schumer said there were signs of progress in talks on a bipartisan bill.

The increasing imposition of stricter coronavirus lockdowns to control soaring infections has highlighted the need for more stimulus, with California announcing fresh restrictions on Monday and New York weighing a ban on indoor dining.

The size of the current US stimulus package remains below market expectations so it may not drive gold prices further, said Margaret Yang, a strategist at DailyFX.

If gold fails to break a resistance at $1,870, there may be another pullback with support at $1,800, Yang said.

Gold is seen as a hedge against inflation that could result from large stimulus.

Reuters rose 0.6% to $24.65 per ounce and platinum was steady at $1,021.50, while palladium gained 0.1% to $2,333.74.