The beatings were so severe and seemingly endless that people thought they would never stop. But halt they have, and gold has risen meaningfully for the first time in over a month.
Gold for February delivery on New York’s Comex settled Tuesday’s trade up $38, or 2.1%, at $1,818.90 an ounce. It was the first time that benchmark gold futures had risen 2% in a session since Nov. 5.
The spot price of gold, which reflects real-time trades in bullion, was up $37.17, or 2.1%, at $1,814.26 by 2:08 PM ET (19:08 GMT).
Despite the rebound, the yellow metal’s prices remained about $270 below August record highs that took futures to nearly $2,090 and bullion above $2,073. Just last week, both benchmarks plumbed four-month lows in $1,700 territory.
Gold’s fall this year has been as breathtaking as its rise.
As the global economy stuttered due to pandemic lockdowns, and the dollar and Treasury yields were battered by gigantic U.S. COVID-19 stimulus, the shiny metal gained about $400 or 25% between March and July as investors rushed into so-called safe havens. That culminated in the August all-time highs.
From there, gold returned to nearly where it was four months earlier, as one potential COVID-19 vaccine development after another resulted in a run on havens. Adding to the hedge fund and algorithm-driven liquidations was selling by Wall Street banks on the notion that a host of immunizations and therapeutics will actually bring the virus under control in a matter of months.
Another thing that tweaked the interest of haven seekers on Tuesday: Renewed talk of a U.S. fiscal stimulus for the pandemic.
For context, it was the Coronavirus Aid, Relief and Economic Security (CARES) Act passed in a bipartisan way in March by Republicans in Senate and Democrats in Congress that helped gold to its record highs.The CARES Act provided about $3 trillion in grants and loans to U.S. businesses and paycheck protection to qualifying citizens and permanent residents.
Since then, Republicans and Democrats have been locked in a stalemate on a successive package to the act, arguing over the size of the next relief, as thousands of Americans, particularly those in the airlines sector, risk losing their jobs without further aid. The negotiations have been further complicated by Donald Trump’s loss of the Nov. 3 presidential election to Democrat Joe Biden, and the incumbent president’s refusal to work with his imminent successor.
Outgoing Treasury Secretary Mnuchin, testifying before the Senate on Tuesday, urged that lawmakers quickly pass a second stimulus to follow up with relief authorized in March, even as he stressed that the package should be modest.
Separately, a bipartisan group of lawmakers pushed for quick approval of a $908 billion COVID-19 relief.
The dollar’s weakness was another factor in gold’s favor as investors returned to looking at the inverse correlation between the two, after almost totally ignoring that variable over the past two weeks. The Dollar Index fell 0.6% to hit a one-week low of 92.1.
“Gold is now comfortable above the $1,800 level and might not see much resistance until the $1850 region,” said Ed Moya, senior market strategist at OANDA in New York. “It seems the vaccine news is heavily priced and that should no longer be the primary bearish catalyst for the precious metal.”
Gold chartist Matías Salord held a similar view in a blog posted on FX Live.
“The next resistance is seen at $1,818/20 followed by the $1,850 area,” Salord wrote. “A slide back under $1,800 would point to more pressure to the downside exposing the recent low at $1,764.”
Moya said the deceleration in U.S. manufacturing and labor data was driving expectations that more monetary and fiscal stimulus was coming over the next few weeks.
“The long-term driver for gold remains the inevitable return of inflation,” he said. “The longest economic recovery ever was able to provide sustained inflation, but the economic recovery once we are back to pre-pandemic life will be accompanied with rising price pressures.”