Gold treads water after sharp sell-off on US stimulus delay

Gold prices were little changed on Thursday after a steep sell-off in the previous session as a breakthrough in long-running negotiations among US lawmakers over a pandemic relief package remained elusive.

Spot gold was steady at $1,839.67 per ounce by 0312 GMT, after slipping as much as 2.5% on Wednesday. US gold futures rose 0.3% to $1,843.50.

"Gold has struggled as markets are disappointed with the inability of US lawmakers to agree on a fiscal deal they were anticipating," said Lachlan Shaw, National Australia Bank's head of commodity research.

The US House of Representatives approved a one-week extension of federal government funding, extending the time left to agree on a broader coronavirus relief package.

But, the US Senate Majority Leader Mitch McConnell said on Wednesday that Congressional lawmakers were still looking for a way forward on a relief package.

Gold is seen as a hedge against inflation and currency debasement.

Against a backdrop of accommodative monetary policy and a weaker US dollar, gold should remain well supported with a low likelihood of a bear market, ANZ analysts said in a note, forecasting gold at around $2,100 per ounce by 2021.

Meanwhile, Britain's medicine regulator warned against the use of Pfizer's COVID-19 vaccine for those with allergies, after two people suffered adverse reactions, cooling optimism over a smooth coronavirus vaccine rollout.

Offering a glimmer of hope was comments from some US health officials that vaccinations could begin as soon as this weekend. "

"We could be seeing a regime change in gold markets as its correlation to real yields has weakened, due to investors continuing to move into riskier assets, creating a challenging outlook for safe-havens like gold," Shaw said.

In other metals, silver rose 0.4% to $24.02 an ounce, while platinum gained 0.5% to $1,005.24 and palladium was up 0.4% at $2,274.79.