By Barani Krishnan
Investing.com - Gold prices dipped Monday as longs cashed out of the yellow metal which returned to above $1,900 an ounce for the first time in almost a week as President Donald Trump ended his stand-off over the signing of the U.S. fiscal relief for Covid-19.
Trump, who leaves office in about three weeks, stunned markets when he announced on Thursday he would not sign the Congress-approved $900 billion pandemic relief and an accompanying government funding bill of $1.4 trillion unless lawmakers agreed to boost to $2,000 the personal aid of $600 for struggling Americans. While the president’s motives seemed questionable since he did not participate for weeks in negotiations for the Covid relief, Democrats rallied behind him on the matter in a rare show of unity.
Trump reversed his stance just as suddenly on Sunday and signed the bill, saying he had gotten Republicans to agree on sending separate checks to Americans to make up for the $2,000 payout. That sent gold futures briefly to above $1,900 an ounce in Monday’s Asian trading, triggering profit-taking that took the market to below 1,875 at one point.
With Republicans remaining silent during Monday’s New York trading hours on the possibility of larger checks for the people, gold continued to trade on the lower end of the day’s range, settling in negative territory.
At the close of Monday’s official session, benchmark U.S. gold futures for February delivery on New York’s Comex settled down $2.80, or 0.1%, at $1,880.40. The session high was $1,904.05 while the low was $1,874.05.
The spot price of gold, which algorithms and hedge funds use to ultimately decide the direction in futures, was at $1,877.83 by 2:07 PM ET (19:07 GMT), down $1.55, or 0.1% on the day.
Gold could remain volatile until the January Senate run-off races for Georgia that could determine if incoming Democrat president Joe Biden gets control of both the chambers of Congress.
Even so, the trillions of dollars in monetary expansion this year alone for Covid-19 relief will keep the yellow metal fundamentally supported, said analysts.
“Gold is on a rollercoaster ride, but the backbone for many gold buyers is the $14 trillion increase to the global money supply — a strong reminder that despite the rebound in yields, we will remain in a low-interest rate environment for years to come,” said Ed Moya at New York’s OANDA.