Gold steadied near a two-week high on Tuesday as optimisim over the rollout of a COVID-19 vaccine countered the market impact of a subdued dollar and hopes for more fiscal stimulus.
Spot gold was little changed at $1,864.60 per ounce by 1300 GMT. Earlier, it touched its highest since Nov. 23 of $1,871.52.
U.S. gold futures were up 0.2% to $1,869.40.
“We saw this washout in the gold price and break of technical levels. Now that it has recovered again in the same environment where real rates are coming under pressure, causing the dollar to weaken, this is normally an environment where gold prices increase,” said UBS analyst Giovanni Staunovo.
The dollar index held near 2-1/2 year lows, raising gold’s appeal for other currency holders.
The U.S. Congress is expected to vote this week on a one-week stop-gap funding bill to provide more time to reach a deal on COVID-19 economic relief.
“In view of the persistently high numbers of new corona cases, which are resulting in tougher lockdowns (e.g. California, Germany), there is growing pressure on politicians to roll out further stimulus measures,” said Commerzbank analyst Carsten Fritsch in a note.
Gold is up about 23% this year, benefiting from its appeal as a hedge against inflation that could result from the unprecedented stimulus unleashed in 2020.
Meanwhile, Britain began its vaccination against COVID-19 on Tuesday.
“The vaccine is more widely available for the rest of the population only next year, not now. The challenges on the economic side are still present and we still need support from the fiscal or monetary side,” said Staunovo, adding the vaccine may negatively impact gold in the second half of 2021.
Silver rose 0.4% to $24.59 per ounce, while palladium fell 0.7% to $2,315.98 and platinum was up 0.1% to $1,022.44.
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