Another rally above $1,875 for gold! New news on fiscal stimulus and Brexit!

Gold hit a two-week high on Tuesday, buoyed by a weaker DOLLAR and growing expectations of more fiscal stimulus to counter the economic impact of the novel Coronavirus case surge.

In intraday US trading, spot gold prices rose 0.6 percent to hit a high of $1,875.19 an ounce, a level not seen since November 23.

“It is clear that the US Congress needs to pass some form of fiscal stimulus. Further fiscal spending is positive for gold and the market seems to be expecting some sort of fiscal stimulus package to be passed, even if only temporarily, “James Steel, chief precious metals analyst at HSBC, said in a note.

Steel also noted that while a generally weaker dollar, negative real interest rates and a “relentless rise in COVID-19 cases” were positive for gold and silver, “more good news on vaccines would be a strong headwind.”

The dollar index held near a 2-1/2-year low, making gold more attractive to holders of other currencies.

With coronavirus cases on the rise, Congress is expected to vote this week ona week-long stopgap funding bill to give more time to work out a novel Coronavirus financial relief agreement.

The Speaker of the US House of Representatives, Nancy Pelosi, said she hoped for a COVID-19 deal and agreed that the stimulus bill would contain provisions worth a $1,200 check, but that it would ultimately be up to Mr Trump.

Gold, seen as a hedge against inflation and currency depreciation, has risen more than 23 per cent this year on the back of near-zero interest rates and the risk of higher inflation from massive global stimulus measures.

Meanwhile, Britain began vaccinating against the coronavirus on Tuesday.

“The vaccine will not be more widely available to the rest of the population until next year, not now. The economic challenges remain and we still need fiscal or monetary support, “said UBS analyst Giovanni Staunovo. He added that the vaccine could have a negative impact on gold in the second half of 2021.

The progress of the Brexit negotiations has also caught investors’ attention. A conference call between Boris Johnson, the British prime minister, and Jeroen von der Leyen, the President of the European Commission, was fruitless yesterday. He said today that while he hoped to reach a deal, it would be “very difficult” to reach a deal before Thursday’s eu Council summit in Brussels.

The latest British news is that Prime Minister Boris Johnson will travel to Brussels tomorrow for dinner with Ms von der Leyen to continue discussions on the future of Britain’s relationship with the EU.

If no deal is reached by the end of the Brexit transition period on December 31, a “hard Brexit” would mean trade between the UK and the EU would be subject to additional tariffs and quotas, causing chaos on both sides of the border. Trade talks between Britain and the EU have stalled because of their differences.

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