Gold prices inched modestly higher on Wednesday, with investors focusing on progress on another U.S. fiscal package and a new round of guidance on monetary policy from the Federal Reserve, due at 2 p.m. Eastern.
“While we remain skeptical of the bull case in gold and silver,” distinct follow-through gains in Wednesday dealings “give added credence to the argument that hope for fiscal and monetary stimulus remains in control for another session,” analysts at Zaner Metals wrote in their latest newsletter.
“It is possible that the markets are quickly moving to factor in ‘action’ from Congress,” they said. “The odds of a stimulus package are much stronger than odds of classic easing by the Fed, with the Fed’s ‘action’ likely to be associated with boosting bond buying.”
No significant changes to policy are expected from the Fed but investors will be looking for any additional guidance on the central bank’s asset-buying program and will parse the latest round of economic forecasts, which could be catalytic for gold prices.
Over the past 24 hours, a quartet of key lawmakers from both parties met face-to-face to hammer out a coronavirus aid package, though the negotiations showed few clear signs of progress.
“If there is not a relief package by the end of Fed discussions at mid-day, we expect the Fed statement to campaign aggressively for fiscal action,” the Zaner analysts said.
Still, optimism for a deal and an accommodative Fed were helping limit the downside for bullion, holding prices near the 50-day moving average, currently at $1,874.99 an ounce, according to FactSet data.
February gold was trading at $1,859.10 an ounce, up $3.80, or 0.2%. Prices on Tuesday marked the highest finish for a most-active contract since Dec. 8.
Meanwhile, silver for March delivery climbed 35.1 cents, or 1.4%, to reach $24.995 an ounce, after gold’s sister metal jumped 2.5% in the previous session.
U.S. economic data Wednesday was downbeat, offering support for haven gold. A report on U.S. retail sales showed a drop of 1.1% in November. A reading for October was lowered as the resurgence of coronavirus cases took its toll on consumer activity.
Separately, a pair of surveys of U.S. businesses added to mounting evidence that the economy is slowing. The IHS Markit U.S. manufacturing PMI dipped to 56.5 in December, from 56.7 and the IHS Markit U.S. services PMI declined to 55.3 this month from 58.4.
“In terms of the gold price, the precious metal is holding on to its gains, and the hope is that it will continue to move higher,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
“Today’s events are likely to set the precious metal tone for the rest of the year,” Aslam wrote.
Meanwhile, European Commission President Ursula von der Leyen said on Wednesday that U.K. and European Union negotiators had “found a way forward on most issues” that remained the major stumbling blocks in their talks about a trade deal. Her comments lifted the British pound to its highest level since May 2018.
That put pressure on the U.S. dollar, sending the ICE U.S. Dollar Index down by 0.2% in Wednesday dealings. The index already trades 0.7% lower week to date. A weaker dollar often offers some support for dollar-denominated gold prices.
Also on Comex, March copper added 0.3% to $3.554 a pound. January platinum shed 0.6% to $1,034.70 an ounce, but March palladium was flat at $2,324 an ounce.