Gold futures are trading sharply higher on Wednesday in hopes that key parts of the world economy are headed in the right direction, weighing on the safe-haven appeal of the US dollar. A weaker dollar tends to increase external demand for dollar-denominated gold.
Gold is also underpinned by falling U.S. Treasury yields and a stronger Euro, which peaked at 18 months after European Union policy makers sealed a recovery plan on Tuesday. of 750 billion euros.
At 09:37 GMT, December Comex gold is trading at $ 1,880.50, an increase of $ 10.90 or + 0.58%.
However, the most important driver of the recovery is the expectations of more stimulus to revive the economies affected by the pandemic. More stimulus measures in the United States will keep the pressure on interest rates closer to zero percent, which will lower the value of the dollar, while making unprofitable assets like gold more desirable.
Other factors influencing gold prices
On Tuesday night, President Donald Trump warned that the coronavirus would likely worsen before it improved. Fear of the virus itself is not enough to drive gold prices up, but fear of the unknown is. Trump did not give a timetable for the end of the pandemic, which could mean that there could be several more rounds of stimulus packages.
Congress returned to Washington to start talks on the upcoming coronavirus relief bill. Lawmakers face pressure to pass laws before the end of the month, when the federal unemployment insurance benefit of $ 600 per week expires.
Republicans and Democrats have to settle differences on several issues, including unemployment benefits, liability protections for businesses, aid to state and local governments, and direct payments to Americans.
BREAKING NEWS
Tensions between the United States and China recently increased after the US State Department confirmed that it had ordered China to close its consulate in Houston, Texas, prompting Beijing to insist on firm countermeasures unless it Washington immediately reversed its decision.
United States State Department spokesman Morgan Ortagus said the directive to close the Chinese Consulate General in Houston was made to protect American intellectual property and the private information of its citizens.
Meanwhile, long-time market bull Ed Yardeni warns that news risks due to the rise in coronavirus cases to renewed tensions with China could lead to a stock market crash of 20% to 30%. This could prompt the Fed to enter with a large amount of liquidity that would likely exert further upward pressure on gold prices.
To see all of today’s economic events, see our economic calendar.
