Gold prices steadied after dropping to their lowest in 1-1/2 months on Monday, as prospects of a massive U.S. coronavirus relief aid outweighed a stronger dollar and lifted bullion’s appeal as an inflation hedge.
Spot gold was steady at $1,826.79 per ounce by 0349 GMT, after having dropped to their lowest since Dec. 2, 2020 at $1,809.90 earlier in the session.
U.S. gold futures eased 0.2% to $1,826.60.
“The gold market remains relatively supported at these levels, as the current run of the U.S. dollar has more to do with safe haven, rather than a discernible pivot to a stronger dollar,” said Stephen Innes, chief global market strategist at Axi.
Earlier in the session, the U.S. dollar held near a four-week peak against rival currencies, making gold expensive for holders of other currencies.
“The U.S. stimulus (plan) is quite large, we’re going to get around 1.9 trillion or 1.5 trillion, and either scenario is good for gold,” Innes said.
U.S. President-elect Joe Biden last week unveiled a $1.9 trillion stimulus package proposal to jump-start the economy and said he wants 100 million COVID-19 vaccine shots during his first 100 days in office.
Gold is considered a hedge against inflation and currency debasement, likely from large stimulus.
“The U.S. dollar and yields may be the new safe havens rather than precious metals and would weigh on prices in the short term,” Phillip Futures said in a note.
“Our market view remain bullish for the long term as the U.S. dollar is expected to remain structurally weak in the long term.”
Among other precious metals, silver rose 0.3% to $24.81 an ounce. Platinum rose 0.5% to $1,078.59, while palladium gained 0.1% to $2,385.29.
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