Gold futures were trading higher Tuesday, recovering from a two week low, with gains attributed to the prospects for another coronavirus fiscal package gaining more traction in Washington before the end of the year.
“Gold prices are rising on optimism that lawmakers are closer to passing a compromised stimulus package,” wrote Edward Moya, senior market analyst at Oanda, in a research note.
February gold was $26, or 1.4%, higher at $1,858 an ounce, after closing 0.6% lower to start the week, hitting its lowest settlement for a most-active contract since Dec. 2, FactSet data show.
Investors were focused on a bipartisan group effort by members of House and Senate lawmakers, who on Monday proposed a two-part package that would separate the most contentious issues holding up approval from a $748 billion package that includes widely supported measures, including extended unemployment benefits and aid to business. Thornier issues, including liability protections for businesses and aid to state, local and tribal governments were put into a proposed $160 billion package.
The rollout of the vaccine developed by Pfizer Inc. and BioNTech SE continued, with the first vaccinations delivered in the U.S. on Monday. The U.K. began inoculating first responders last week.
“The political pressure is hitting a critical level as the virus spread over the holidays is likely to trigger more lockdowns that force many businesses to close,” Moya wrote.
Many economists view a further fiscal relief program as crucial to bolstering the virus-stricken economy, but also supportive for gold prices as a larger fiscal deficit, when monetized by the Federal Reserve’s bond buying program, implies a depreciation of the U.S. dollar.
“Gold is hovering once again around the $1850 level and should look to extend gains if Congress continues to take strides towards passing the compromised COVID relief bill,” the Oanda analyst said.
However, Moya noted the easing of other factors, including gold buying from exchange-traded funds, vaccine breakthroughs, and the conclusion of the 2020 presidential election won by former Vice President Joe Biden against incumbent Donald Trump has deflated some appetite for bullion.
Meanwhile, silver for March delivery was trading 56 cents, or 2.3%, higher at $24.61 an ounce, after a 0.2% loss in the previous session.
Precious metals took a further leg higher after the day’s U.S. economic reports.
A reading of business activity in the New York state, Empire State index, has slowed over the past few months and expanded only slightly in December, according to the latest survey from the New York Fed released Tuesday.
Separately, the import price index edged up 0.1% last month, the government said Tuesday.