Gold prices gained on Wednesday as the dollar weakened, with investors looking past a top U.S. Republican leader’s decision to postpone a Senate vote on increased pandemic relief payments.
Spot gold rose 0.2% to $1,881.62 per ounce by 0548 GMT. U.S. gold futures were up 0.2% at $1,886.20.
“A weaker dollar is enough to create a small upward momentum for confidence to be maintained in gold," said Michael Langford, director at corporate advisory AirGuide.
The dollar index hovered close to a more than two-year low, as traders shrugged off Republican Senate Majority Leader Mitch McConnell’s decision to put off a vote on increasing COVID-19 relief checks to $2,000.
Langford said $2,000 stimulus checks would most likely go through and that would be a positive for gold, adding that the metal needed an unexpected catalyst to see significant upside.
Gold is seen as a hedge against inflation and currency debasement likely to result from large stimulus measures unveiled to mitigate the impact of the pandemic.
“Gold could reclaim the $2,000 handle in 2021, depending on the U.S. inflation outlook. Further rounds of fiscal stimulus under the (Joe) Biden administration should translate into more upside," said FXTM market analyst Han Tan.
Investors now await Jan. 5 Georgia runoff elections that would determine which political party will control the U.S. Senate.
Meanwhile, coronavirus cases continued to soar globally, with the first case of a new infectious virus variant being detected in the United States.
“Exchange Traded Fund flows are set to have a major say on how gold performs over the course of 2021, with investors expected to wade further out into risk-on waters," FXTM’s Tan said.
Among other precious metals, silver rose 0.5% to $26.31 an ounce, platinum gained 0.6% to $1,055.62 and palladium climbed 0.8% to $2,346.18.
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