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Markets

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

  • Offering a glimmer of hope was comments from some US health officials that vaccinations could begin as soon as this weekend.
Published December 10, 2020

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.

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