Gold prices continued to improve especially on Tuesday morning in Asia. It is because new pandemic-related restrictions are taking effect around the world. In addition, the stock market in the U.S. also broke a four-day winning streak. This factor makes one of these main commodities increase.
Those futures were reported to be up as much as 0.17% to $1,869.15. Spot gold also rose as much as 0.17% to $1,865.85. The prospect of improving prices to return to the $1,900 figure was influenced by several factors. One is the possibility of stimulus in America.
As the corona cases increase there, it is likely that the U.S. government will reach a budget agreement, which will avoid closure. They also issued another round of stimulus worth about $908 billion to improve the state of the economy there because of the pandemic.
Increase Reached More Than 3% Last Week
The prospect of more stimulus helped gold gain to 3.3% last week. This was a rebound from the 5% drop that occurred the previous week. This condition also received attention from various parties. One of them was Jeffrey Wright via his tweet.
Jeffrey, an executive vice president at GoldMining Inc. said that gold prices continue to rise because of some of the value of spending. Then, expectations that stimulus negotiations resulted in another $1T deal also made these metal conditions more stable than some time ago.
Also supporting the gold price is talks between the UK and the Eurozone over Brexit which have yet to find a deal. In the U.S. alone, the stock market broke a four-day winning streak as new COVID-19 restrictions came into effect.
Why Stimulus Expectations Can Affect
The price of gold hit its highest level in two weeks on Tuesday. This is because investors remain hopeful that U.S. stimulus measures will continue to fight the economic fallout from the surge in coronavirus cases. Data in the market shows how the price is rising.
Spot gold rose as much as 0.2% to $1,867.66 an ounce. The situation was at 0314 GMT. Its gain continued to $1,869.06 which was the highest gain since November 23, at the start of the session. U.S. gold futures also rose as much as 0.3% to $1,871.70.
Now, the market more or less predicts that a deal will be able to be completed. Their forecasts certainly relate to how quickly, how much stimulus will be provided, and how it materializes in future inflation expectations. It was stated by an IG Markets analyst, Kyle. Rodda.
The U.S. Congress will vote this week. It is especially on the provisional funding bill to give it more time. They need more time to reach an agreement on Covid-19 assistance and prevent the closure to be made by the government.
The Progress of the Talks is Already Visible
The Democratic leader of the U.S. Senate, Chuck Schumer, said that there are signs of progress in the current bipartisan bill. Highlighted the need for stimulus, California last Monday imposed a new set of Covid-19 restrictions or lockdowns.
Meanwhile, New York is considering rules regarding the ban on indoor dining as national cases of COVID-19 continue to rise lately. Back in gold, the commodity is seen as a hedge against inflation where it can result from the large stimulus.
Technically, gold remains in an overall bearish trend. The situation occurs in the medium term. This was conveyed by Margaret Yang, a strategist at DailyFX. Since the current stimulus package remains below market expectations, it may not push prices further ahead.
If later gold prices fail to break through the defense at $1,870, there may be another setback with support at $1,800. But still, everyone should look at developments in the market especially with regards to US stimulus as well as talks on Brexit.
