Gold firms as US stimulus progress weighs on dollar

Gold prices inched higher on Tuesday as the dollar weakened, though the start of COVID-19 vaccinations in the United States and Canada buoyed hopes of a swifter global economic recovery and kept the metal's gains in check.

Spot gold rose 0.2% to $1,831.64 per ounce by 0322 GMT, while US gold futures gained 0.3% to $1,836.50.

"A slight softening of the US dollar more than accounts for the minor lift in gold," said Michael McCarthy, chief strategist at CMC Markets, adding that market participants were looking to the US Federal Reserve meeting as the next impetus.

The dollar hovered near a more than two-and-a-half-year low, hurt by progress on a fiscal coronavirus relief bill as lawmakers appeared optimistic over a deal split into two parts in an effort to win approval.

Capping bullion's gains, coronavirus vaccinations in the United States began on Monday with a New York City intensive care unit nurse becoming the first to receive the vaccine.

"We're at peak vaccine optimism at the moment ... so even without further developments, it's possible sentiment could pull back and that could be supportive of gold," McCarthy added.

Meanwhile, COVID-19 infections continued to surge globally, prompting tighter restrictions and lockdowns in the Netherlands, Germany and London, while deaths crossed 300,000 in the United States.Reuters

Investors now await policy meetings of the Fed starting on Tuesday and the Bank of England on Thursday.

With the roll-out of vaccines, central bankers may re-evaluate their policies and enact stimulus programmes with a less sense of urgency going forward, Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.

But ultra-low yields and negative real interest rates are expected to remain supportive of gold, he added.

Among other precious metals, silver rose 0.7% to $23.99 an ounce, platinum added 0.1% to $1,008.76 and palladium gained 0.4% to $2,300.45.