Gold steadies on stimulus hopes

Gold inched higher yesterday buoyed by growing expectations that US lawmakers would agree on new stimulus legislation to blunt the economic impact of the coronavirus, bolstering the metal’s appeal as a hedge against inflation.

Spot gold rose 0.05 per cent to $1,913.76 per ounce by 9:57 a.m. EDT (1357 GMT), having hit its highest in almost two weeks on Monday at $1,918.36. US gold futures fell 0.06pc to $1,919. “The main pillar of support for this (gold) market continues to be the optimism in regards to the additional coronavirus stimulus package,” said David Meger, director of metals trading at High Ridge Futures.

“This theme of ongoing stimulus-erosion of the money supply by injecting additional fiscal and monetary measures into the market” weakens the dollar and supports gold, Meger added. Gold tends to benefit from widespread stimulus measures from central banks as it is widely viewed as a hedge against inflation and currency debasement. However, improved appetite for riskier assets, which, apart from the stimulus hopes, was also bolstered by US President Donald Trump’s return to the White House from hospital, stymying bullion’s gains.

Meanwhile, Chicago Federal Reserve Bank President Charles Evans on Monday said he expects US inflation to reach 2pc by 2023 and wants to push it to 2.5pc to offset years of below-target price rises. “If inflation rises ... and the Fed does not raise rates, which it has basically said it will not, then real rates will become more negative.

This is good for gold,” HSBC chief commodities analyst James Steel said in a note. The rapid rise in equities may also see increased hedging-related buying in bullion, Steel added. Elsewhere, silver shed 1.19pc to $24.06 per ounce, platinum fell 2.15pc, to $877.67, while palladium rose 0.1% to $2,364.49.