By Barani Krishnan
Investing.com - Gold prices hit a three-week high on Tuesday settling up for the fifth time in six sessions, racing toward market bulls’ apparent target for $1,900 an ounce on expectations that the U.S. Congress will agree on a new round of spending for the coronavirus pandemic.
Democrats in the House of Representatives and their rival colleagues in the Senate have been trying since the week began to agree on the specifics of a $908 billion bipartisan fiscal relief plan proposed last week.
The two sides still seemed some distance away from a deal on Tuesday as Republican Majority Leader Mitch McConnell tried to drop liability protection and state aid in the package that has been critically important to the cause of the Democrats.
That regress, however, did not stop gold futures from notching a second straight day of gains and the fifth in six sessions since the yellow metal’s last negative settlement on Nov. 30.
In Tuesday’s trade, gold for February delivery on New York’s Comex settled up $8.90, or 0.5%, at $1,874.90 an ounce. It hit a session high of $1,879.75 — a peak in three weeks.
The spot price of gold, which reflects real-time trades in bullion, was up $7.96, or 0.4%, to $1,870.62 by 3:50 PM ET (20:50 GMT).
“Gold is itching to get back above the $1900 level, but it may need to see Senate Majority Leader McConnell offer an olive branch to Democrats,” said Ed Moya, analyst at New York’s OANDA.
“Democrats have already come down from an over $2 trillion stimulus proposal to roughly $900 billion. Gold is ready to rise even further, but it may struggle until the stimulus stalemates shows some signs of ending.”
Gold is emerging from one of its most brutal sell-offs ever after dynamic breakthroughs in Covid-19 vaccines and their potential availability before Christmas caused a run on money in safe-havens.
The yellow metal lost about 6% of its value in November, its most for a month since 2016 and fell into $1,700 territory. Investors have in recent weeks directed money mostly into stock markets and other risk assets such as oil, as those witnessed an epic rally amid the notion that vaccines and therapeutics would soon bring an end to the spread of the coronavirus.
Despite the continued emphasis on risk, gold as a haven is rallying again on talk of a new U.S. Covid-19 stimulus effort, which triggered a plunge instead in the dollar, the alternative trade to the yellow metal. The Dollar Index hit a six-year low of 90.47 on Monday.
Last week alone, Comex gold for February gained almost $60, or 3.3%. It was the yellow metal’s best week since the week ended Oct. 30 and erased a significant portion of the previous week’s near 5% loss, which was the biggest weekly plunge since July.
The U.S. Congress originally passed in March the Coronavirus Aid, Relief and Economic Security (CARES) Act, dispensing roughly $3 trillion as paycheck protection for workers, loans and grants for businesses and other personal aid for qualifying citizens and residents.
In the past few months, however, Democrats in Congress have been locked in a bitter debate with Republicans in the Senate on a successive relief plan to the CARES Act. The dispute has basically been over the size of the next stimulus as thousands of Americans, particularly those in the airlines sector, risked losing their jobs without further aid.
The stalemate was finally broken last week after a bipartisan group of Democrats and Republicans proposed a $908 billion relief bill, which the two sides have been negotiating since.